GreenMobility A/S (GREENM) Earnings Call Transcript & Summary

Welcome to today's event where we have the pleasure to present GreenMobility. To have us through today's presentation, we are joined by CEO, Kasper Gjedsted. Today, we'll cover your Q1, not so many figures, but I think a lot of details on what you're doing operationally and with all your technology. So I think we will also focus in -- a little bit on that and look a little bit ahead on that in this presentation. Everybody, you are very welcome to ask questions down -- in the box down below. We have already got some good questions in, but do feel free to ask during this presentation, and I will take the questions in the end. But for now, I think I will hand the call over to you, Kasper.

Okay. Thanks, Michael, and hello, everybody. After this important notice, for those of you who haven't met me before, I've been with GreenMobility since 2023, so almost 2 years exactly, where I started in March '23. I have a background from the car rental industry -- the traditional car rental industry. We have been doing turnarounds and growing those companies. Sixt, we grew it from DKK 17 million to DKK 100 million plus in revenue. Was the only car rental company in Denmark that was profitable throughout the financial crisis. It became a great company, still is, by the way. And then I went to Avis and did a turnaround after 5 consecutive losses -- 5 consecutive years of losses in Denmark, 10 consecutive years of losses in Sweden. We turned that around in 18 months and made the biggest profit in 50 years. So we're trying to do the same with GreenMobility here. And for those of you who don't know GreenMobility that well, we are a car sharing company, a very modern car rental company, if I may. We are in Copenhagen and Aarhus. We used to have an internationalization strategy. But as a part of this strategic change we made towards the goal of being profitable, we have now focused our entire operation on the Danish market. We have more than 100,000 trips and we have around 1,400 vehicles, and we save a bunch of CO2 and congestion in the cities that we are in. With regards to our fleet, our core fleet is the Renault Zoe. It's a relatively small, [ Polo ] sized electric vehicle with a relatively big battery and a good range. But on top of that, we also have cargo vans, also electric -- all of them are electric. And we also have some, what we call premium cars for the longer drives. If you're more passengers, you prefer to have a little more comfort. We also have the Polestars and the Renault Meganes. And you rent the car from your app, or from our app. No need to go to a rental company. You just go to the street where the car is located. You swipe, you drive, you go. So 2024, we ended -- and I was standing here, it was not more than -- I think it was actually 1 month ago today, but I presented the 2024 results on our continuing operations, and we had a guidance of between DKK 120 million and DKK 130 million on the revenue side, and we ended the year with DKK 129.5 million, so at the upper level of the guidance there. And we saw a magnificent growth of 72% growth compared to 2023. And if we continue into the Q1 revenue here, we still see a good growth, 36% growth rate, going from DKK 21 million -- DKK 24 million to almost DKK 33 million in revenue for Q1. So, we are obviously satisfied with that. So compared to our guidance, it might seem a very high revenue growth here. But I remind you that a big portion of the revenue actually comes from the more cars that we have inserted versus Q1 '24. So please bear that in mind. But again, we need to also have an uptake on that car -- on those extra cars that we have inserted and the uptake has been really good. On the EBITDA level for '24, we also improved that. As you can see from this graph, we had an EBITDA of DKK 5.2 million in 2023, and we ended the year with DKK 35.8 million in EBITDA in '24 on our continued operations. So quite a significant improvement, and I think it tells a lot that we have been successful with the whole transition of the company here. And if we continue to Q1, we can see that we still have an improvement of our EBITDA, 84% up, from DKK 3.8 million to DKK 6.9 million in Q1, if you compare the 2 quarters. And that is also, I think, a good indication that our strategy is working, that operation is strong and it's becoming stronger and stronger. And actually, therefore, I want to take you through some of the many activities that we do, in a while. Because -- what is it that we do? Why are we so significantly better on the revenue and on the EBITDA level? We are able to find more customers and find more customers that are spending more with us. I think that has been one of the big challenges. Could we do that? Would that be a market when we are placing that many cars into it? But it seems like there has been a very good uptake from the market in the extra cars that we have placed. But we're also doing things differently. We have -- from a car sharing perspective, we have a lot of commuter customers every day going to and from work, short trips, going to and from sports, whatever customer journey you can imagine. But it's primarily shorter trips. But what happens then when all of the customers are on Easter vacation, for example, of these short trips that you normally do to and from work, what I call the backbone of our trips, the bread and butter, the commuter trips. What do we do then to utilize the cars, because we don't want them to stand there without making revenue. So in those periods, we are actually transforming into a more, what we call a traditional car rental company, even though we have a much better, of course, product, and it's much easier and all that. And the result of that is what you can see on the picture to the right here. This is a picture of [ Sealand ] and a picture of our cars on [ Sealand ] and Southern Sweden, Thursday last week during Easter. Everybody was off, but people decided to use our cars to go wherever they wanted to go, summer houses, picnics, whatever. And it really shows also the transition that we're going towards a much bigger utilization of the cars for more purposes than -- that people have been used to before. So I'm also really happy about that development in our company. We have been -- in my world, we have been underinvesting in technology. Our platform is not up-to-date. And that's why it was important for me that we are updating our platform, the customer-facing platform, but also the back end of the platform. So I'm happy to say that we are coming out with a new platform for the customers and for the back end before summer. And it has a lot of improvements to it from a user experience, but also from potential earnings and revenue potential. We can start doing revenue management in a way that we haven't been able to do before. Why should a car cost the same on a Friday afternoon when it's raining and everybody needs a car compared to a Monday at 10:00 a.m. when everybody is sitting at the office? It doesn't make sense. Current technology doesn't allow for what I call a simple thing, which is a more sophisticated revenue management. A lot of good new features for the customers as well. It's much easier to find the cars, much easier to sort the cars and so on and so forth. So it has been very important to me and to us that we are really giving the customers an even better journey starting online and much better upsell potential for us. And then we're also working a lot with our operations. One of the Achilles heels when you do this model of car sharing is that we don't inspect the cars after each rental. And that means that a customer can drop trash. The next customer may not see it or might accept it and doesn't tell us about it. And then the third customer who actually cares about that, gets a very bad experience. But now we don't know which of the foregoing 2 customers we can charge for the trash or the smoking or the damage that they have made. And technology is also going to change all of this. So what we are doing is that we are installing smoke detectors across the whole fleet. We're going to install cameras. We're going to install damage detection software and hardware in the cars. And let me show you that because it actually means a lot -- I think it means a lot for our profitability and our ability to make money and profit. But it also shows -- and that's just as important because it's so correlated that we can get some much better customer experiences, if we can start to prevent people from smoking. Or at least that is my hope that when people are aware that we have these smoke detectors and that we will actually charge them for smoking in our cars, then it doesn't make sense for them to smoke, right? So I brought this one. This is a smoke detector. We'll put it in the car and the first 100 cars have already been installed. The rest of the fleet will be -- they will be installed in the rest of the fleet before summer. And it's very simple. There's a lot of AI and there's a lot of software behind it. But what it does is actually it's measuring the concentration of particles in the air. And we are getting an alarm. As soon as it measures particles above 200, then we are getting an alarm. And we are contacting the customer and saying, "We're sorry about you smoked in our car and you have to pay, pay up." So, that was the smoke detectors. I don't like that this is a revenue driver for us because I call it toxic revenue. I much rather prefer that this has a preventive effect because I want to improve the customer experience. So even though we are driving revenue with this because we now are charging people who are smoking in our cars, I would much rather have that -- the slab over the finger, which is a financial slab, of course, that, that would lead to a better customer experience because now we are preventing people from smoking. I have talked about it before, we are getting damage detection across the entire fleet. That has also started now. So we are -- have another box that we have here, a small box that will -- that is also detecting the [ anomalities ] in the vibrations of the car. And here again, we are getting a knowledge about -- data about a damage that occurs instantly. So if you are involved in a damage, be it small or large, the large one we normally find, but the smaller ones, like the example that we have here, we don't normally find them because we don't see the car every time it has driven. And the next customer is probably not -- there's a risk that he or she is not reporting that damage to us. But now we can actually do that. We can actually see that damage in the second that it is made. So we can contact the customer automatically and say, "Hey, you made a damage to our car, please fill out this damage report." And I think that also -- I mean, that is for sure a revenue driver because before we have had to pay up some of these damages ourselves because if we couldn't find the customer who made the damage, who should we blame. It's also a better customer experience because sometimes, unfortunately, the wrong customers have been blamed for the damage because we didn't know which [indiscernible] damage. So it's a much better customer experience. It gives a lot more confidence in the product when you drive it. You don't have to worry about you getting blamed for a damage that you haven't done, which is one of the, I think, big barriers to a lot of people when they are renting a car, even though they're only renting it for 10 minutes or 30 minutes. I think a lot of you might have had that in your back head when you're renting a car in Mallorca or wherever you're renting it, right? So this is a better customer experience. You can actually trust it. We know exactly when this event was happening. And we are going out to photograph the car right after, if you don't do it yourself. So the car is actually blocked until it's photographed by either yourself or by us in the event of a damage. So I think that's also something that will really improve our operational efficiency and also the revenue coming from this, and all this [indiscernible] of course. And the last of the major digital improvements is also that we are -- in a big amount of cars, we're also installing cameras forward, and we're -- looking camera dash cams. This is not just regular dash cams, of course. This is AI-driven dash cams. These dash cams, they can actually recognize if you have left trash behind. They can also recognize, again, if you've been into an accident. They can even recognize if you're smoking or bathing just from AI algorithms. So I'm also seeing a lot of opportunity in that. Especially from the prevention point of view, it's just evident that you really have to be stupid if you want to break out terms and conditions as we can document pretty much everything now, which we haven't been able to before. So I'm actually seeing a big improvement from an operational side. Now quantifying the effect of that is not something we're able to do now, because we really have to run an extended test of all of these technological improvements, but it's definitely something that will have a positive impact. We keep our expectations for '25, which is a revenue growth of [ 17% ] to 13% and an EBITDA growth of 20% to 40%. And again, I remind you that the growth that we see in Q1, which is traditionally our lowest performing month because not a lot -- not as many people wants to go to the beach in January, or to the summer house or wherever they want to go, or they're just staying more indoors. And by the way, they have less money in January and February than the rest of the year because they spend [ the money ] all on Christmas. So there is a seasonality factor in this. So Q1 is normally -- and the growth, as I said before, is primarily coming from the fact that we have inserted more cars compared to the same quarter last year. But of course, I'm happy to see that there has been a good uptake in those cars that we then have placed in. But we're not expecting the same growth rates in the -- for the rest of the year.

Shall we jump into some questions, Kasper? Yes. You have turned the business around, and it looks like the new strategy is working, but the share price is still low and it has limited shown this turnaround. Can you explain that -- how do you explain this kind of question?

Yes. I think that's a fair and very important question, and I take it actually very seriously. I'm a shareholder myself. So I have the same question, to be honest. I think over the past year here, we have really executed on a significant turnaround, and I think we have been successful in doing that. We have been going from huge, huge losses to almost DKK 10 million in profit in '24 on our continued business. And we have improved our EBITDA with 6x, right? We have streamlined our operations. We are continuing to streamline operations. We have much more focused on the business now because we have one market, Denmark, to focus on instead of a lot of international markets. And I think we have actually proven that this revised strategy has worked. The fundamentals of the business are stronger than ever. But the markets are not always moving in sync with the operational improvements. Unfortunately, there is a certain delay. And I would also say, particularly in this current environment that I think we all are aware about, there might be a degree of caution or lack or even bigger delay in the recognition. And I just got to admit, it takes time for rebuilding investor confidence. That's where we are because, especially after years of restructuring or underperforming, that has been the situation of this company. So it takes time. But that said, I really believe that this value will be recognized. And my job is to stay focused, have full focus on the operation and delivering consistent good results, delivering on our promises, on our expectations and just continue to have a transparent communication with the market. And if we keep executing and keeping our promises, at least in theory, our share prices will eventually reflect the underlying strength of this business. And I think what you can see from '24 and the remarkable -- I think it's a remarkable turnaround of the company and also that we are actually continuing that into '25 here in the first quarter, and the catalysts that I've just been talking about, the many, many, many activities that we're doing, and we still have a lot of things to do. I think we're on the right path to showing that not only profitability, but to show really, really strong performance.

Perfect. I think that was more than just a political answer that you will let the market. So thank you very much for that, Kasper. In your Q2 announcement, you are showing revenue and EBITDA growth and the figures, but not the bottom line. Can you explain why you haven't shown the net result? And do you expect that GreenMobility is already profitable on the bottom line now?

Yes. So yes, I mean, in our Q1 communication, yes, we emphasized the revenue and the EBITDA growth because these metrics best reflect the operational -- underlying operational performance. And that is really, really where we are on the short-term, really focusing on improving the business because on the longer term, we could also go in and talk about the financing and so on. It takes a little longer than the low-hanging fruits from the operational improvements that we see here. And I think this is in line with what a lot of other companies do. So it's -- I think it's pretty standard [ sum ]. I'm afraid you'll have to wait for the half year result before we can discuss the net result.

Perfect. So no indication on whether you are profitable. You don't want to give that. But on a yearly basis, is it possible that the bottom line will also be profitable?

Well, we haven't guided on anything else, but take a look at the development in our revenue, in our performance in '24, and do the math, right?

And there was also a question. You guide on EBITDA, and it could be a little bit wrong to guide on EBITDA because you are a business that has, of course, leasing cost -- I mean, you have depreciations, you have interest cost. So -- but I guess, it's the question the same to that question because it's where your focus are right now and it's where your target -- it's the same question, but -- I agree with the person asking that, of course, that you should also look at these other things. But if I understand you correctly, that's a little bit longer term you can turn around the interest cost and the depreciation than the operational side. Is that how we should answer then why you measure that?

The short answer is yes to that. I can confirm that. It takes longer. It's very -- it's more stable because we have a linear depreciation of our -- linear and a conservative depreciation of our car values. And it just takes -- the effect of that just takes longer than the short-term effects of changing a lot of things, as you can see in the operations and on the top line here.

And then there's a question about the debt to [ IFO ] and how much you pay down that in the month. You haven't given that in the Q1. Do you have any ballpark of that you can give us?

No, that's very specific. I mean, I'm happy to check it. I think there might be a note in the annual report about it, but let me get back to whoever asked. It's a good question, but let me get back to them.

Yes. They will send you an e-mail. Then there's a question about how many cars do they now have in Copenhagen and Aarhus? And what is the revenue per car in Copenhagen?

So the revenue per car we are not publishing. We have around 1,200 cars in Copenhagen, around 200 in Aarhus. We are changing them depending on seasonality and so on, so it’s rough numbers. And for the revenue per car, we are not publishing that.

Then there's a question. How much is the new IT platform costing? And have you running the -- have you seen that already in your results? Have you running the expense that in your P&L?

Yes. So how much it's costing, for obvious reasons, I can't tell that because I'm not allowed to, for a contractual reason. But it's not going to cost us more than we are spending on IT today. We're doing it in a, I would say, a more intelligent way. We are asking our suppliers to deliver more than they have been doing before. We have a much bigger impact on what they're delivering than -- compared to before. So what we're getting is -- actually for the same cost, we are getting a better product. So it's -- I guess, it's better negotiation and tougher negotiations with our suppliers that has given us that result.

Perfect. And the development in your active customers in first quarter, also, you didn't give us an exact number, but can you give us some ballpark on are you seeing more active customers coming in?

Yes. With a growth rate of about 30%, you -- it's clear that we have -- we are getting more customers in. So our customer base is growing. It was what I also mentioned in the beginning, I'm happy to see that we have set in -- inserted more cars into the market here, but there has been a very good uptake. And it's not just the same customers who are driving more, we are adding customers. Otherwise, we wouldn't be able to fill out all of the extra cars that we have inserted into the market.

And then is the strategy about 35 big cities in 2025 postponed or totally dropped? I think you can answer [ Asian ] [indiscernible]?

Yes. So well, what we have said is that we are focusing on the Danish market.

So let's call a drop. Is that -- I don't think that would be totally wrong. Has there been any changes to the competitive situation? You -- I think we -- it's always interesting to follow them. And I think you have a pretty good overview because you can follow whether they apply for parking licenses and so on. And a little bit also on the Bolt purchase, I think it was the taxi market. But can you talk a little bit about the competitive situation, whether it has changed or how you're looking at the competitors out there?

So if you take the direct competitors in terms of car sharing companies and so on, we don't see any big changes. It's not like anyone has applied for hundreds and hundreds of parking spaces. So that's the direct competition. If you look at the acquisition from Uber and from Bolt in the Danish -- excuse me, the Copenhagen taxi market, we've seen some very aggressive campaigns where it was Uber who was running with 80% discount to customers. So 80% discount is not a sustainable business for them. And obviously, we could feel it in the very short-term when they were running these campaigns. But it seems like it has sort of damned off. It was a way for them to -- and I think a clever way for them to go into the market and say, "Hey, we are back." But 80% is definitely not sustainable from an economic point of view. And if you look at the metrics, Michael, it's easy to see that the taxi market, the Uber, the Bolt taxis, on the metrics point of view, they cannot compete with us because you have the factor of a chauffeur in those cars.

And even if they have went in on the market, it's still under the old -- it's on the taxi meter, right? There's nothing changed. There's no legal changes. They are running a taxi service in Denmark with high prices as always. Is that the...

Yes, taxi service with a chauffeur who needs a salary, that alone -- our customers are their own chauffeurs. So we're not -- we don't have that sort of cost in comparison with Uber when we look at the metrics there. So from a price perspective, I think we will -- from a price perspective, we will win each time.

And then there's a question. With the sensors and digital equipment in the cars, I guess, you are equipping -- you haven't fully equipped them. How much can that lead to in savings for you? Do you have any -- have you seen -- have you been able to run cases? Have you been able to estimate that somehow on the data you are getting in? Or is that a little bit too early?

That is too early. We don't have any conclusions yet. I was surprised how many events we have been seeing in the first 1.5 weeks since we had the first, I think, 100 with the new sensor technology. Yes, I was surprised by that. But again, depending on it, I prefer not to have the revenue from people who are smoking. I prefer them not to smoke in our cars. It's what I call toxic revenue, right? It's not a good sustainable revenue. I don't want to charge people for smoking. I would rather have them not to smoke in our cars. But if they do, I have to do it because we will have to send up staff to clean the cars, and the car will stand idle and cannot make revenue and all that. So unfortunately, I -- we'll have to do it. But it's in the early days, and we haven't scaled it sufficiently yet. I mean, before summer, we will have the entire fleet with the damage detection boxes in it. We will have around 400 -- before summer, we will also have around 500 smoke detectors there. So I think we'll be able to see the results quite fast. And we haven't been -- I think we have been conservative in the cases that -- in the business cases that we have made on this. So I think I'm optimistic about the results coming from this.

So the return on investing in capital on these damage sensors, and I -- so are they very expensive to put in the car? Or how much did you actually spend on damages last year? I don't know whether you want to give that number, but I guess it's in the millions, right?

Yes, it is in the millions.

But I -- to get a feel -- okay, it's in the millions. And how much are the sensors costing? Can you give us an idea of the business case here without giving the exact numbers?

Yes. But we are talking about millions in damages, also that we had to recoup ourselves. And for every damage that is -- I mean, it's expensive to make repairments in cars. Even though it's smaller cars, it's just expensive. And for every damage that we can charge the customer that they actually made -- I don't like them to make damages, right? But if they made a damage, they have to pay up for it. I mean, they are insured, but up until the deductible that they have. Just like your own car, you have -- if you make a damage to your own car, you probably have a deductible with one of your insurance companies. And it's exactly the same with us. So -- but I cannot quantify it yet. I don't want to quantify it yet. It can give a wrong....

And the equipment in the cars, are they heavily expensive or …

I can tell you that compared to our international competitors, we have paid 80% less. 80% less.

So you are a good test market, I can hear. That's perfect. Perfect. I'll not ask you more. I know it's... Are you in line with respect of the private life laws? That was also when I saw this picture, I know it was blocked out, but the GDPR storage of this data, how about that?

Yes. So obviously, you have to comply with every sort of GDPR rule there is. It's something that we take very seriously here. We are, of course, also updating our terms and conditions to reflect that. For the cameras, for example, how does that work? I mean, I'm not just going to install cameras in all 1,400 cars to begin with. It will be a limited test. We already -- we have been running a very limited test. The camera -- excuse me, the picture that I showed you before, that was coming from the one car that we have actually had tested [ this in ] for 9 months. So for 9 months, this car has been running around with a camera and an AI-supported camera. And it has really shown a very, very good business case based on that one camera. But scaling that up to 1,400 cars, we don't even want to think about that big number because it is a quite substantial number. So we need to test it gradually. We need to test it if the business case is holding up, and we need to test it from a consumer perspective. I mean, what if, for whatever reason, our consumers turn their backs to us because there's a camera in the car pointing to the cabin all of a sudden. I mean, it's very, very -- you can't go into a bus, you can't go into a taxi, you can't go into...

And that would also be my... [indiscernible] in the taxi, sitting in the bus...

But we're taking a little bit of a conscious and easy step on this. We don't want to rule in our business for whatever reason or see if there's a backlash coming that we haven't thought of. So again, it's a very controlled manner that we do this in.

And then the last question, then I will let you off the hook. Any updates on the Belgian trials? Has there been any new court filings? Anything on this?

No, it's still -- for us, it's still the same. It's running. It takes a little time in Belgium, but there's no big things on that particular case down there.

That was the last question. Thank you, Kasper, for taking us through your results and maybe a little, little sneak peek into the future with the technology you are installing in your cars. So thank you to you, and thank you for the audience listening in. Everybody, have a nice weekend.

Thank you.