Xplora Technologies AS
OSE:XPLRA
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Welcome. It's our Q4 and 2023 Full Year Results Presentation. Welcome to everyone here live in the audience and also welcome everyone that following us live during our live stream.
First of all, thank you to also [ Spyder Banken ], hosting us here today. We got some good indication it would be preferable to stay here during our event, so we'll try to do that going forward. Thank you so much for that. And also, it looks like even more people are coming. So we are very happy for that.
Today's presentation will probably be 40 to 45 minutes, so slightly longer than normally because we have quite a lot of interesting things on the agenda today. And of course, we will have Q&A at the end as normal. For the presentation today as last time, my name is Sten, Founder and CEO. I will take you through some overall highlights from the year first and Q4; and then Knut, our CFO, will take you through the financials more in detail.
Then Kjetil, our COO, will take you through some of the key operational highlights. And then still our Kids division, 99.9% of the revenue so far. We'll have our Executive Vice President, Jason Pyne, to take you through those developments and updates. Then I will end to take you through look into the future. I'll do my best, and then we end with the Q&A.
All right. Before even going into the numbers, I would like to express my sincere gratitude to the full Xplora team. We have just been through a major turnaround in 2023, only made happen by the great team within Xplora. It's been a fantastic job, which I'm very proud to go through today.
Jumping into the number from Q4 first. As you can see, we had NOK 212 million worth of group revenue, up 19%, of which NOK 60 million came from our highly profitable recurring service revenue, almost up 50% year-on-year. We ended the year higher than we thought and hoped for with subscriptions of 257,000. Our gross earnings for the quarter, very close to NOK 100 million, up 40% year-on-year and we had another positive EBITDA in Q4 at NOK 12 million, which was up NOK 32 million from last year. And we ended the year and Q4 at a very healthy cash balance of NOK 137 million.
Looking into the full year, we are getting close to NOK 700 million, which is actually the full year, up 37% year-over-year, of which recurring service revenue represented NOK 210 million, up 38%. Our gross earnings NOK 332 million, up 40% and the full year reported EBITDA, NOK 34 million. So a turnaround in profitability and running the business on an EBITDA level of NOK 67 million improvement.
And of course, end of year with the same number of subscriptions and cash balance as Q4. When we started this year, both in our Q1 as well during our Capital Market Day, we said we have to deliver on 5 key elements this year. Profitability still growing in a declining market. We have to demonstrate service revenue also outside the Nordics. We have to reduce cost. And we have to make some really major sacrifices on things we would like to do, but be even more focused and say no to a lot of things in order to stay focused.
Particular, if we all recall, this glooming ghost of companies that had to do fundraising or taking capital early this year would be a catastrophe for a lot of companies. So we said we have to demonstrate profitability. We have to make money. And we also said, we will share blood, sweat and tear in order not to be in a position to raise money. We have looked a lot of you guys in the eyes and said that will and shall not happen. We need to demonstrate profitability. We managed that with a NOK 67 million turnaround.
We started the year also saying that the best estimation we had, the consumer market in general is declining. The Kids market still showed case or potentially a 15% growth, we managed 37%. We said we should manage 175,000 subscription. When we started the year, we ended at 257,000. Personally, as a CEO, particularly even as a founder, some of the hard stay ever since we started the company came when we had to initiate efficiency program in Q1 in order to save money. But it was crucial to get us where we are today, 43% of our OpEx based on revenue versus 54% the year before.
And we should focus only on our 9 market where we had mobile setups, 3 new products. We managed to launch 2. Jason will take you through the details and 2 price points on our SIMs, basic and premium. In parallel, running in a market that is declining, our sales and marketing team managed to grow when other ones are declining. Our finance team managed to handling the situation buying in dollars and selling in NOK, not easy, but they had done a fantastic work.
Our tech team have handled component shortage throughout the full year. Many companies have failed on that. We have never been short of components. And I think it's fair to say we have the world's greatest logistics team, always made sure we have products in our warehouse when we need to sell them when freight has become a growing issue. That was our promise.
Before Knut will take us through the financials. I have 4 key takeaways in particular from Q4. So during the presentation, something you can pay extra attention to. Q4 ended, as I said, with NOK 60 million recurring service revenue. And what's really interesting, because a lot of you guys here and a lot of our investors have said, you have done great in the Nordics with your service revenue, but are you able to replicate that model into the global market that is slightly larger.
If you look into the numbers in details, you will see that in Q4, 76% of the new net ad subscriptions are coming outside the Nordics. That's very good for our future growth in the service revenue. It's our highest single quarter ever. And also, we have got this question. You can sell service revenue, highly profitable revenue in retail, Amazon and online, but you still sell a lot of product during your telco. Are you able to drive service revenue from those channels? And we ended Q4 with a total of 4 revenue share model with these telco.
And I think Kjetil will pinpoint that has almost never happened before, at least very rarely. And we have been able to sell more units at a higher price point even if consumers are more sensitive on price, with increased conversion to our SIM even at a lower marketing cost than before. So personally, I think that's my 4 key takeaway from Q4. That is the reason for our growth and the numbers, which Knut now will take you through.
Thank you, Sten. I will go through some of the key numbers. And Sten have already shared some of them with you. We had a growth in full year of 37% from NOK 502 million last year to NOK 689 million this year. And we had a 19% increase just in Q4 compared to Q4 2022. It's the best revenue quarter ever and it's also the best revenue quarter both on devices and services.
If you look at revenues and compare them with Q4 2022, we had a substantial increase in service revenue, as Sten mentioned, from NOK 41 million to NOK 60 million. On the device side, we had NOK 137 million a year ago and now we are NOK 151 million. So it's the strongest quarters for both revenue areas. When it comes to the gross margin, we see that on the service revenue, we had a quite stable gross margin for several quarters, around 82%, 83%. And we had in Q4 '22, we had also a gross margin of 82% and in Q4, 83%.
So we have quite a good gross profit coming from the services side. We have also quite a good profit -- gross profit from the device sales, but the margin is much lower there, but still we had an improvement from 26% in Q4 '22 to 32% in Q4 of '23. The margin for full year is approximately on the same level as we had in Q4. So it's a very representative quarter, both on gross profit and gross margins.
I can go into a lot of the numbers, but I would like to focus on a few of these in the profit and loss. We have, as Sten said, we had gross profit in the quarter of NOK 99 million, almost NOK 100 million in the quarter compared to NOK 71 million in Q4 2022. Key point here is that it's a reduction in expenses from last year from NOK 92 million to NOK 88 million in Q4 2023.
One point here, you also see that we had an increase in total payroll expenses going from last year, NOK 86 million to this year, NOK 113 million. But here, we need to give an explanation so that you can see why this deviation can be explained by.
Last year, we had a reduction in payroll expenses because of the share-based compensation. This year, we have expense in the payroll expenses. So the difference there is NOK 10 million. We have -- this year, we have NOK 6 million in the accounts for commission and bonus. Last year, it was 0. And maybe the thing that is easy to forget is that when we capitalize R&D expenses, the majority of the expenses is related to payroll.
So last year, we capitalized NOK 38 million in expenses. And this year, we just capitalized NOK 24 million. And the majority of that is also, the NOK 14 million, is also an impact on the payroll expenses. Kjetil will come a little bit back to more of the details on the cost side and our cost effectiveness programs.
Resulting from gross profit and expenses, we generated a positive EBITDA of NOK 12 million in Q4 2023 compared to a minus NOK 20 million Q4 2022. And this EBITDA is half of this year's total EBITDA result of NOK 34 million. And last year, it was negative NOK 34 million. On every presentation, we received the same question about amortization of the Xplora Mobile acquisition, how do that impact the numbers.
And as you know, we are doing our accounts according to Norwegian GAAP and not IFRS. If we have done it according to IFRS, we didn't have to include the amortization of the goodwill of this acquisition. So we are going to present both numbers going forward and adjusted operating profit, EBIT, excluding the amortization of the Xplora Mobile acquisition ended on NOK 6 million in Q4. Total year, NOK 19 million -- sorry, NOK 15 million. And you can also see that it was quite negative last year.
On the balance sheet, there are 2 things I would like to focus on. We have the goodwill and a customer contract from the Xplora Mobile acquisition. It's amortized with NOK 38 million in 2023. And you can see the 2 items, goodwill and customer contracts and the customer contracts are fully amortized first quarter of 2025. And at that time, we will have half the amortization from the NOK 8 million to the half of it.
The other very important part of this is that now we have a good and strong cash balance of NOK 137 million in cash and cash equivalents. It enables the company to do a lot of easier choices when it comes to how we handle the cash flow.
Then we can look a little bit more on some key items on the cash flow development. We started the quarter with NOK 117 million in cash. We had net positive cash flow from operating activities of NOK 25 million and that's compared to a negative cash flow from operating activities in Q4 2022 of NOK 21 million. We have a positive NOK 10 million in net change in working capital and that's largely due to a reduction of receivables and prepayments of goods that we have not yet have delivered.
The last item here on the cash flow, NOK 17.5 million is increased equity from shareholders that provided a loan guarantee. The cash we got in end of year, but the capital was registered in the first week of January. If you look at the full year, Xplora started the year with only NOK 50 million in the bank. There was a CapEx of NOK 24 million during the year and that's within the guided number of NOK 20 million to NOK 25 million that was presented in the beginning of the year. And we are then exiting the year with NOK 137 million in cash. Thank you. Kjetil?
Thank you, and good morning, everyone. I will now take you through the story of how we managed to turn around the business. We have addressed several areas, both to grow the existing revenue streams under service and smartwatch side and also to introduce new service revenue streams, but also to optimize the cost of the operation.
We introduced our mobile services in 5 new markets commercially. We capitalized on the new value-added service, Xplora Premium. We also introduced and grew the telco revenue stream. And we introduced in Q4 another service stream, the service fee on the Xplora application. Then we also managed to increase the average selling price of our smartwatches. We took that from NOK 884 in Q4 '22 to NOK 1,047 last year, an increase of 18%.
And we also, on top of that, managed to optimize the OpEx over revenue. So 6 main activities that helped us to improve the performance of the business. Going to the first one, the telco revenue model. We commercially launched this now in 5 new markets in '23, meaning that there were a lot of preparations prior to that, we set up the new telco agreements with the network operators in the various markets. We did the technical implementation. We prepared the billing and invoicing processes and we also set up customer service operations in these markets. So a lot of preparations before we went commercially live.
Then as Sten said, 76% of the net growth of subscriptions came in Q4 last year in markets outside of the Nordics. And you will see that we launched at the beginning of the year commercially in Germany and in the U.S., followed by Britain before we also started the operation in Spain and France in May. And in December, we had 8,000 net growth in the U.S. and Germany, representing the highest net growth of all our operations.
So that's a shift from traditionally Norway and Sweden being the primary drivers from our service subscription revenue to now in December last year to be Germany and the U.S. So that's a change that is notable. The premium service, I think we are very proud of this because it's something that traditional telcos have tried for many, many years to introduce. They have talked about it in their strategy, but effectively, no one had been able to actually monetize on this.
And you see by the end of last year, we had 42,000 new revenue lines, subscribers, on the Xplora Premium, which is our content service, gaming, education for children. Very steep uptake. The way we sell it is to combine it with our mobile subscription plan. So either you opt in for the basic service, which is the traditional telco service or you select the option with the premium service included. And we experienced that 25% to 28% of the customers, they opt in for the premium service.
So also the way we sell it clearly has a drive for the success of this service. The margin on this service is very, very high. Of course, we have some content rights that we pay for, but it's a solid contributor to our gross margin. Then we have also been able to increase the ARPU and the price level of our subscription. So looking back 3 to 4, yes, we started with a price of NOK 109 in the Norwegian market and we have lifted it NOK 179. There was a significant increase when we introduced the premium service. And we have done so by really optimizing the prices, doing price analysis and see what the consumers are willing to pay.
We aim also for doing an adjustment in '24, now introducing a new scheme of consumer price index adjustment. We see that some of the international telco players that have already done so and we want to replicate that in our markets.
We also see that the 4 quarter rolling ARPU increase is not as strong as the price increase in Norway. The reason for that is that the price level outside of the Norwegian market is lower than in Norway. So we don't get the same growth in uplift as we do in the Norwegian market on the price level, but we also have been able then to lift the ARPU across all markets with 18% over the last period.
Then the revenue share model, I honestly didn't believe that this was possible when we introduced it because we are actually asking the telcos to give us a share of their telco revenue when they sell our products with their own subscription plans. And going back in history, we have been very successful with selling our smartwatches to telcos. That was how we built the business in Germany, but it was like a onetime gross margin and revenue from the smartwatch of roughly NOK 350 margin.
And with the service revenue model we have now implemented, we collect a monthly revenue from these telcos. So the gross margin for the lifetime of that customer relationship is roughly NOK 1,800. So that means that more than -- well, almost 5 to 6x the margin that we historically used to collect from these customers. We have roughly 10,000 customers or service subscriptions on this model and we increased it with another NOK 5,000 in the last quarter of last year.
So 4 operators gain us this revenue, 3 in the Nordics and [ Trueme ] in the U.S., we added 2 in Q4. When it comes to the customer lifetime value, before we went IPO, it was, as I said, NOK 920 revenue and NOK 350 gross margin alone from the smartwatch. After introducing the different services we have with the basic subscription plan and the premium subscription plan and considering the effective lifetime of the customer relationship, we see that the revenue has increased to almost NOK 4,000 and the gross margin to NOK 2,800. So it's a total different business model. And you can see the scalability and the effect that this will get going forward on our performance. So totally a shift in the business model from 2020 to 2023 and this is the model we follow going forward.
On top of all the new revenue streams and growing the revenue, optimizing the price from the smartwatch revenue, we have also been able to reduce our cost. And I think we can be very proud of the entire team. On top of all the revenue increases and the growth we have been able to optimize the cost. So if you look at the OpEx over -- in percent of revenue, we see that we are down by almost 10 percentage points for Q4 last year compared to '22 10 percentage points.
And we see how this is split between the most important OpEx categories such as marketing, payroll, also having in mind what Knut presented and the other OpEx. So all of these are going in the right direction. We also optimized our team. So we have reduced the full-time equivalents from 128 at the beginning of '23, to 111 in Q4. And on top of that, doing so we have also been able to grow the revenue with 18%. So I think that's quite a strong team effort of the entire team, both delivering on revenue growth, expanding services, optimizing the cost with a smaller team. So that concludes my part.
Thank you, Kjetil. Good morning. So let me start by sharing the key strategies for 2023. We have 3 products. We concentrate on 9 core markets and a SIM with 2 price points. And as Kjetil recently showed you the basic and premium services. So our 3 products for 2023. We successfully launched XGO3 and X6Play. And the X6Pro, we will launch in Q2 this year. Our 9 core markets, we're now firmly concentrating on, obviously, our sales growth through 2023, which will have our mobile subscription, as I shared, our SIM product.
So how have we done in sales? For Q4, we generated NOK 151 million. For the year, NOK 477 million. Unit sales was NOK 467,000 and as you can see on the screen, Germany, still our biggest market. Norway and Sweden, following behind with Finland, the U.S. picking up very well and the rest of the world.
On to our services and mobile subscriptions. We had a very, very good year last year. We set ourselves a target at the starting year of 175,000 paying subscribers. After Q1, we reached 169,000, Q2, 189,000, Q3 226,000 and at the end of the year, we reported 257,000, given our service revenue of NOK 210 million compared to NOK 152 million year-on-year with an annual recurring revenue now at NOK 240 million.
So how is that split? The NOK 257 million has 205,000 paid subscribers. In 2023, we launched the Premium services, as Kjetil showed you. We have recently launched the revenue share product as well as a service fee pilot in the Nordics in November, but that's now created 52,000 subscriptions, which are creating a higher ARPU in our sales process.
So for Q4, if we take our net sales in both SIM and Premium, this is where you can see something very, very interesting that we look forward to in 2024. In some of our markets outside the Nordics and the U.S., as you can see on the screen, is one particular one, we have been working on a big growth strategy. And in Q4, the second highest market in net sales was the U.S., taking 27% of our sales. So the U.S. is firmly coming towards the Nordics, I suppose you could say.
And for Premium, we are introducing the U.S. Premium services in our subscriptions in the next quarter of this year, although we have been testing it through the pilot in the app only for last year. So how are our customers using our Kids, should I say, using our product. We had 458,000 activated watches in 2023, 605,000 new app accounts, which gives 100 -- with 1.92 parents now have our app on their smartphone. 82 million chat messages were sent by the watch.
Now we have a slogan Xplora, Play To Move The World. And I think we really have done that in the last year. Our kids walked 581 billion steps, which is 322 million kilometers. In essence, our kids have been around the world 8,000 times. They've been to the moon and back 480 times and they've even been to the sun and back once. I believe technically, that is more than anyone else in the world that's traveled. Thank you very much.
All right. Thank you so much. Now we will try to do our best to look ahead. And just before that, a lot of information. Hopefully, you find it useful, but some key takeaways, I would say, more units increase price while spending less on market selling them. That's a good thing for scalability. We are increasing conversion. So more and more are buying the product with our SIM. Like we mentioned, we have been able to handle currency in a good way. So we showcased the highest gross profit ever.
And as Knut said, we are ending the year on a healthy note when it comes to cash in the bank. Now that allows us to invest in the future, which I will showcase to you in a minute. And also, as Jason ended, our annualized recurring revenue currently is NOK 240 million, which means that every single month we wake up and go to work, it ends NOK 20 million with 80%-plus margin. And we are planning to add even more on that. That's kind of the takeaway.
We are just 2 months into the New Year. Something has already happened. I would like to mention one thing from a business side. We have already now in particular, when we have demonstrated that we can have a favorable business model also for the telcos, we have already added one new telco agreement within the DACH region with Swisscom post quarter.
I would also like to mention that, as we said, we will continue to reduce our CapEx. This year, we are not introducing new products. I will showcase some upgrades, but we will even more focus on our software side to improve customer experience. We have already started quite a lot of projects in that regard. And then we have really now accelerated our future growth into the family IoT strategy.
We have 3 divisions: Kids, Senior and Software as a Service, SaaS. I will now do my best in 3 slides to give you a very quick and precise overview on the strategy for each. Jason just explained the Kids division. Like I said, 99.9-something percentage last year was coming from this business.
As we all know, very clear value proposition, the target group, kids 4 to 10. We are safely onboarding kids to the digital world by providing the child's first phone. That phone can make phone calls, send messages, GPS location, safe zones, even an SOS and we incentivize kids to move more by the activity platform. That's a core essence of that product.
We are continuing, as Jason said, our 9-3-2 strategy, 9 core markets, 3 products, 2 price points. We gave a promise when we started '23. We will do nothing else than that before we demonstrate profitability. We will still apply the 80-20 rule on net, 80% on this focus, but we will allow a little bit expansion even for the Kids strategy this year.
Continue to focus on the increase of service revenue, particular Germany and U.S. We are on the product side, introducing an eSIM version of the X6Play. And we are launching a second generation of the XGO3, not a new product, but we build it wisely, so we can introduce it with new software services, new colors, et cetera. We will do that.
And the key focus, otherwise on a kids strategy. We have 4 platforms, our e-com platform when we are selling products, then we are activating the SIM card, then we are downloading the family parental app and we have our customer support platform. That's the whole user flow within our products. We will, this year, focus to improve the user experience across all those 4 platforms. And as you know, we have mentioned before, we had still a lot of growth opportunity. Kids 4 to 10, 30 million kids in North America, 25 million in our core markets in Europe and 2 million in the Nordics. That's Kids.
For the first time, we are now specifying high-level strategy for our future senior growth market opportunity. We purposefully choose to disclose this during our Q2 report in '23 because since then, we have been working in detail to analyze and document this market opportunity. The core value proposition for Senior is to look into the age group 65 to 85, but potentially more important than the age itself, our documentation, our research showcase there is a clear indication, pre- and post-experience of a fall across all markets. That will be very important.
And this is not something that is either a smartphone or a watch. It's a proposition where the watch lives alongside the smartphone. All the recognized Xplora basic services, as I just listed on the slide before. But with the introduction of medical alert, maybe the most important application, the fall detection, surveillance mode and a solution called mPERS, which is basically we allow professional alarm central to get all the data in the case of emergency, the location, input and data about the user. And of course, we think it makes a lot of sense to also incentivize the target group to be more active.
As we disclosed and also one of the reasons why Jason just said we are launching the Pro version for Kids. Soon, we will use the same hardware platform also for the Senior market, although with a slightly different design and additional features and functionality.
As we speak, we are currently performing live testing in 3 different markets, which, of course, will be the key driver for when we are launching the product, but we are committed to commercially launch this second half of this year. And as Kjetil has mentioned, we did not think that it would be one single market similar to our kid market where we can sell subscription with low data usage and low connectivity time and use.
But that market is exactly the same for the Seniors with less streaming, less video content, less social media. So we are targeting to replicate the same successful recurring service revenue, even potentially with an extended lifetime for this market. And in numbers, you can see this market opportunity is even bigger. North America, NOK 51 million; Europe, NOK 36 million; and in the Nordics, NOK 6 million within that target group.
Our third division is our SaaS. We have now transferred intellectual property from our MVNO, SIM, IoT and value-added service solution, which has just been presented into the SaaS division. This division and this team are providing now all these services to our Kids watches as well as the Senior watches. So really no change in that regard.
However, that division will also start to sell these solutions to as many other IoT players as possible. It's slightly more difficult to estimate the size, but our best estimation tells us for every 100,000 watches we are selling in our core market, 0.5 million to 1 million other similar products are being shipped primarily as a hardware only. That's our target group.
And why will this make so much sense? Because as Kjetil demonstrated, these players are only making the same as we do on our hardware on a good day. By adding our services, we can provide them a rev share, that means they can double their margin. We can do that with a very fast time-to-market solution. We have already done this in 9 markets. It's a very compelling business model because all these IoT players have basically no additional CapEx, fast time to market, no risk whatsoever, but a huge financial upside, but of course, even more so for us.
We are selling 3 different services, a certified IoT platform, our SIM and our Premium services. Very soon, starting to travel around the world to sell this. And we are even committed to try to announce the first third-party agreement before we're entering into second half of this year. Now it's set. And that's, of course, a pure B2B play, Kids and Senior business to end consumer.
So from an outlook perspective, we are saying this year as last year, the Kids division still forecast roughly 15% CAGR growth. We think still that makes a lot of sense on a revenue level. As we said in -- or 2023, we said we will also this year prioritize profitability over growth alone. We also are saying this year that our subscription growth will be more important than unit growth. We will continue to focus on cost efficiency to reduce OpEx in percentage of our revenue and we will be working heavily to expand the lifespan of the product to continue to have lower CapEx than earlier years.
And as I just said, we are committed to launch and report the first revenue streams from SaaS and Senior division this year as well. So we are super proud with the turnaround. We have a really solid foundation going into '24 and we have 2 new divisions to drive very highly profitable revenue. Probably a lot of questions, which we'll move into now. And we were spot on 45 minutes.
All right. We are left from last time, operation and finance, join my side. If it's okay for the audience, I think we will start with questions from online.
Just straight into it from [indiscernible]. Can you also provide us with some comments on capital allocation? Cash flow has been good in Q4, you pay down debt. How will you allocate capital going forward? For you, Knut.
Well, we have been able to grow the cash in the bank from NOK 50 million to NOK 137 million during 2023. What's important here is that we have fluctuations during the year. And Q1 is traditionally the weakest quarter for Xplora, but we are going to see a quarter with the service revenue that is higher than we had a year ago.
So we have more, call it, help from our service revenue on the cash flow. When it comes to allocation of cash, it's linked to Sten's description, we are reducing the capital expenditures related to new products and focusing more on the operations. I think that's the top-level explanation of that question.
Okay. Also, one question. You mentioned favorable exchange rates in your reports. But what does that actually mean and some examples. Still for you, Knut.
Okay. So favorable exchange rates, it's -- could mean something different from different companies. But for Xplora, it means that we are selling our products in euro and we are buying them in U.S. dollars. And as long as these currency fluctuates in a good way and in 2023, it has been fluctuating between $1.05 and $1.10, meaning that it has been quite stable.
Then we will have the same effect on the revenue, the COGS and the OpEx. So for instance, in 2023, we have the positive impact of exchange rate of about NOK 44 million on the revenue side. But when you take it down through the P&L, we end up on a full impact of exchange rate that was favorable of a plus NOK 3.5 million. So a favorable exchange rate for Xplora is that the exchange rate between U.S. dollar and euro is on a good level.
Last year, it was bad. The year before that, it was quite good. So what we are doing, ongoing, we are securing our currency for a period of time in order to avoid the big exposure for negative exchange rate fluctuations.
2022, it was bad?
2022, it was bad.
Yes. Can you tell us more about the initiatives you are looking into for 2024 in order to increase revenue or reduce and work with the costs?
I think I could talk about that for 20 minutes. But as you see, we have 4 key service revenue streams. I think I explained a bit about the new markets that we entered into last year, U.S., Germany and so forth. So it's obviously to continue to grow the sales in those markets, increase the conversion coming into more and more channels that actually are able to sell our services.
In Germany, for instance, we are working a lot now with big German retailers to introduce our services. It's about nitty-gritty things like packaging design, training of employees, a lot of initiatives that we work on. When it comes to the Premium service, we gradually expanded that. We will work on getting full scale effect from that in the U.S. We work on the conversion. As said that we had -- actually, Denmark is the best market with 28% of customers opting in for it.
When it comes to the telco revenue share model, we will gradually get more and more since we introduced these services throughout last year. When it comes to the Xplora app service fee, we have now introduced that in more and more markets. We'll get effect from it. We have done simlock in a new product in Germany that will even grow the subscription share. And on the cost side, we introduced all the cost optimization initiatives during 2023. So pure math tells us that, that will have the full effect this year. And of course, we are constantly looking for optimizing the cost side. That was some examples of what we do.
Thank you. And you currently have MVNO operations in 9 market, but how do you plan to address the remaining customers outside your core markets?
If we decide to do it, it will be purely technology-driven because we have stated in this presentation, we focus on the 9 MVNO core markets because it's both costly and it takes a lot of resources to set up those operations. But there is something super interesting happening now in the industry when it comes to EOT connectivity.
So there may be an opportunity to expand into new markets where we already sell or have the opportunity to sell our smartwatches also with connectivity. But that's something we are checking and we'll look into and it will be depending upon the technology development. But eventually, we could scale the business also in other markets.
Without going into too many details on that, but that's also why we stated we apply the 80-20 rule, giving us some room to explore that new technology opportunity. Very good. All right. So one question related to the Nordic. Nordic has previously been a big driver. Now it's even more growth outside. Are there any tendency that we can expect a peak in the Nordic or can we continue also to grow in the Nordic market? That's also a good question.
I think that's fully up to us to work on achieving it. We see that we still have the highest penetration of -- in the Norwegian market. It's twice as high as in other Nordic markets. I think just by replicating what we successfully have done in Norway, we can expect or should be able to grow also the other markets. So I would say it's purely up to our own performance. The market is there.
As you know, we have roughly 20% market penetration in Norway. And with no comparison whatsoever as a full disclosure, but we just stayed a couple of days in Mobile World Congress in Barcelona. Some of our team members are still there. And at least some data points without similarity whatsoever, but some data points at least from the Asian and Chinese market demonstrated roughly a peak at around 50%.
Again, we wouldn't know if that is replicable to the -- our market, but at least we see still room for growth, even having as much as 20% in the Norwegian market. So I think that was most of the questions from live stream. We are happy to also have some questions from this room. Or while we are thinking about that, we get one more. Xplora sold 145,000 smartwatches in Q4 '23. How many smartwatches did you sell in Q4 '22?
I don't know if you have that number now, but maybe someone can find that out while we speak.
As mentioned, we are primarily reporting on revenue, but Jason shared some of the details as well during the presentation. But any questions from the audience? Or maybe those extra minutes in the presentation made the whole deal. Yes.
How is the competition -- how is the competition outside the Nordics? How is your market shares outside Nordics? For example, U.K., which is a very...
It is still a very immature market. So we -- I mean, there is no worthy, let's say, big brand names that have a product in our category. The only company would be Apple with the iWatch, but it's focused on, let's say, used or adults. So that is not a pure kids product. Though a lot of, let's say, if you look at Amazon in the U.K., you will find a lot of Chinese-based products, but they are not, let's say, GDPR compliant. So like a mason can find like anything. So -- but there's nothing if you look at the retail channels or approved and certified products, there is basically very, very little competition. There are a couple of Australian players, but I think we are as the only brand that has positioned itself in a very strong way in the channels.
At least across the market. I think it's more or less as we have stated at least the last year plus that we will find some local players from market to market, 1 or 2, but very few still across multiple markets. And we also see a lot of the retailers operate across multiple markets as well, which give us a significant competitive advantage that we can supply multiple retailers across markets. And also, I think it's fair to mention, particularly since we also have the additional revenue from our services that allows us also to heavily compete when it comes to marketing and even supporting the sales from the retailer because we basically have a higher profit on selling our product versus the competitors that are operating in the different markets.
All right. I think actually, if no more questions, we will be hanging around for quite some time. So we are very happy to speak with you one on one. And of course, everyone online if more questions, we are also happy to receive questions coming in, and we'll do our best to follow up as always. So thank you, everyone.