Holaluz-Clidom, S.A. (4H2.F) Earnings Call Transcript & Summary

Good morning, and welcome to Holaluz's H1 2025 Results Presentation. Thank you for joining us today. I am Carlota Pi, Co-Founder and CEO of Holaluz, and I'm pleased to be sharing our results for the first half of the fiscal year ended June 30, 2025. Before we begin, I'd like to introduce Foix Valde, our Chief Financial Officer, who joins me today and will be presenting our detailed financial results. I want to remind everyone that our discussion today may include forward-looking statements, which reflect our expectations as of today. Actual results could differ materially from what we discuss. This slide that you are seeing contains our complete forward-looking statements disclaimer. Here's what we'll cover today. First, I'll provide an overview of who we are and our differentiated business model. Then, I'll introduce you to our H1 2025 performance highlights. Foix will review our operations and financial performance in detail. And finally, I will outline our ESG progress and summary. Our commitment to fully decarbonize the world drives everything we do. We are building the largest and most impactful green energy community in Europe, unleashing the full potential of electrifying energy demand by scaling distributed solar and storage solutions on Rooftops across Spain. We connect people to green energy through the extensive use of technology and data. For 14 years, we have been leading the highly critical energy transition as a disrupter and innovator in Spain. Our key differentiators includes our Energy Management technology platform connects green energy producers at scale and distributed with residentials and SME customers through our innovative fixed rate subscription-based product, the Tarifa Justa. A leading customer proposition in Solar and Storage installation offering the best product with the largest savings for customers. And significant growth potential in a market where Solar installation penetration is still under 5% of total market in Spain. All this is built upon a unique and differentiated business model that seamless it combines Solar, Storage and our proprietary energy management technology to deliver affordable, reliable, local and, of course, green energy solutions. Our strategy represents a fundamental transformation of the energy system. We are moving from a centralized oligopoly that is polluting and has very expensive transmission and distribution costs to a distributed, decarbonized, democratized and affordable clean energy model. We achieved this by a vertically integrating distributed generation assets, Solar and Storage, controlled by our technology platform to secure affordable local and green energy. This approach allows us to bypass T&D costs by using the proximity grid instead. Our business model creates a flywheel powered by trust, technology and AI. It consists of three interconnected elements. First, Solar and Storage. Our one-off installation unit delivers Solar energy systems maximizing savings for both the Solar owner and the local Holaluz customers. Second, Energy Management. Our recurring revenue unit manages both energy supply and ongoing maintenance services. Supply is sourced from at-scale generators through our route-to-market operations and from customers seated solar and batteries. And third, Holaluz's technology platform. Our proprietary technology platform is at the core of our competitive advantage. It features a comprehensive data layer that captures real-time energy production, consumption and market data across our entire network. The platform manages our portfolio of at scale green producers and solar home energy systems through advanced AI and automation capabilities. It continuously optimizes production and consumption patterns enables dynamic energy matching between producers and consumers and powers our unique subscription model, like Tarifa Justa. This data-driven platform provides us with unique insights and operational capabilities that competitors cannot replicate, forming a strong technological moat. So, what makes Holaluz different from the average market player? While others offer basic solar self-consumption installation, flexible assets with limited user interaction and basic energy management with fixed price for surplus electricity, Holaluz delivers distributed generation ready installations, end-to-end from sale to installation and maintenance, that maximize Rooftop potential to increase savings, not just for the owner of the systems, but for the whole network. A Home Energy System platform, integrating PV, batteries and EV chargers to optimize customers' energy production, storage and demand. The most competitive subscription-based energy supply and maintenance products, leveraging our ecosystem of decentralized and centralized green energy generators. Now, let me discuss a critical development that significantly enhances our competitive position and validate our strategy. For years, Holaluz has been building and developing technology and operational expertise in distributed energy management. What we are seeing now is the regulatory framework evolving to align with the capabilities we've already built, transforming our platform into an increasingly valuable asset. The new self-consumption decree significantly expands our addressable market through key provisions that directly benefit our business model, extension to 5 kilometer radius, surplus sharing them on community members, creation of the self-consumption manager role and distributed storage regulation. This expansion increases our potential customer reach from 70% to 85% within our installation radios, enabling new energy community business models that we are uniquely positioned to capture. Our proprietary platform with real-time data, products like Tarifa Justa and our established battery base, which already offers initial arbitrage capabilities, positions Holaluz to capture this growth expand margins, unlock new products and revenue streams and create sustainable long-term value. The recent public consultation on the Royal Decree 244 on self-consumption transforms the capabilities we've developed in advance to market standards. This is a powerful validation of our strategy. Our battery leadership is a key strategic asset that positions us uniquely for the distributed storage opportunity. We achieved a record 81% battery penetration in June '25, significantly above the 30% Spanish market average, positioning Holaluz as a European leader in Solar with Storage. The chart shows our trajectory. We've gone from around 15% at the beginning of '24 to 81% penetration today. This isn't just about today's sales. It represents an installed base of batteries that provides us with a first-mover advantage as we new distributed storage regulation enable behind the meter flexibility services. Our initial arbitrage capabilities are already operational leveraging our proprietary platform to optimize battery usage and maximize customer savings. As the regulatory framework expands to enable monetization through flexibility service and energy communities, this installed base becomes increasingly valuable. We have unique positioning to unlock new revenue streams from distributed storage services, energy community management and grid flexibility. Capabilities we've built ahead of the market and that are now being validated by regulatory evolution. Before diving into our H1 '25 results, I want to provide context on what shaped this period. Everything I'm about to describe unfolded exactly as we communicated to the market, full transparency throughout. Let me walk you through the timeline chronologically. We closed 2024, having secured a EUR 22 million capital increase structured in two phases. The first EUR 6.5 million was partially executed in late '24, with a reminder completed in Q1 '25. The second phase, a EUR 15.5 million convertible loan was designed to fund our growth plan. In March '25, we've achieved a critical milestone, approval of our financial debt restructuring plan. This was backed by broad maturities of our financial entities covering 100% of debt with no write-offs and extending payments through '28. Here's where timing became crucial. This plan was initially scheduled to enter into force on April 30, which would have allowed us to launch our business plan in May. However, the plan required judicial homologation and this process took a little longer than anticipated, while the judicial homologation was notified on June 2, after a 15-day objection period with no challenges, the plan finally entered into force in -- on July 29. This delay had real consequence. The convertible loan couldn't be converted until the plan entered into force, pushing our business plan to start September 1, 8 months later than originally planned. During the interim period, before the plans entry into force, we managed prudently, prioritizing cash protection. This protective stance while necessary, impacted our H1 consolidated results. The good news since the plan entered into force in July and we deployed the capital, launching our business plan on September 1, we've been executed -- executing as designed. Now, I'll hand over to Foix, who will show you how this time line is reflected in our H1 '25 numbers and what we are seeing as we're executing on our strategy.

Thank you, Carlota. Let me walk you through the four key pillars of our H1 '25 performance. The first pillar is our financial strength. As mentioned, we completed our EUR 22 million capital increase and implemented our comprehensive debt restructuring plan, which covers 100% of our debt with no write-offs and extend payments terms until 2028 with approximately 70% backed by ICO, the Spanish Official Credit Institute. This institutional backing reflects confidence in our growth business project. The second pillar is our record operational efficiency. We've achieved an exceptional 30% year-on-year reduction in normalized operating and personnel costs from EUR 12 million to EUR 8.5 million, driven by AI and automation implementations across critical business areas. This improvement is structural and independent of the restructuring plan, providing a more efficient financial base to progressively capture the benefits from gross profit growth in the coming quarters. The third pillar is our solid operational base. We maintained a strong portfolio of over 255,000 contracts with more than 13,800 solar contracts under management. Our customer satisfaction remains strong at 4.1 out of 5, and we've achieved a leading 81% battery attachment rate over sales, significantly above the 30% Spanish market average. And finally, our fourth pillar is the fact that the market tailwinds are converging with our business model. That is our build ahead capabilities are now converging with the new self-consumption regulatory framework. EcoVadis lines financing availability of EUR 22 billion and falling company costs. This transforms Holaluz's unique technological platform into an increasingly valuable asset. Now, let me show you the specific metrics that underpin these highlights. Financial metrics. The consolidated normalized EBITDA for the period was minus EUR 2.1 million, impacted by the delays, Carlota mentioned before, but showing significant recovery in the second quarter and a positive trajectory from July onwards. Normalized operating cost decreased by 30% year-on-year, a remarkable achievement driven by AI and automation. And our customer lifetime value of our CAC ratio is maintained at 3.4%, demonstrating a strong unique economics. Our operational metrics, as mentioned, we maintain a strong operational portfolio with over 255,000 contracts and exceptional battery penetration. Lastly, on brand and ESG, we maintained 4.1 out of 5 Trustpilot score, reflecting a strong customer satisfaction, 39% women on the team, demonstrating our commitment to diversity and more than 2.9 million tons of CO2 equivalent saved since 2010 and counting. Looking at our consolidated P&L, there are several key points to highlight. Revenue was EUR 68.1 million, down 29% year-on-year, mainly explain the drivers. In Energy Management, which there is a portfolio reduction as our client acquisition strategy could not be fully executed due to the cash protection measures we adopted while awaiting the judicial homologation and convertible loan conversion. The policy of protecting cash limited our investment in new customer acquisition, especially through external commercial channels. As a result, our portfolio at the end of June stood at more than 255,000 contracts, representing a 20% reduction compared to the 370,000 contracts in the same period of 2024. This net portfolio reduction impact both overall consumption and billing volume. Additionally, the Spanish residential solar market continued its contraction in 2025, driven by the high interest rate environment and the absence of government subsidies to stimulate the market, which affected the number of installations executed. It is important to note that these revenue figures do not include go-to-market operations, which totaled EUR 11 million in the first half of '25 compared to the EUR 56 million in the first half of '24. Gross margin was 70% in H1 '25 versus 25% in H1 '24. The lower gross profit generation, particularly in the first quarter of '25 for Energy Management was due to the cash protection measures adopted during the transition period. This situation began reversing in the second quarter and it has really fully normalized since the debt restructuring plan went live in July, allowing us to progressively recover our operations and business execution plan. Operating costs were -- this is where we see remarkable progress that demonstrates that the strength of our operational model. Normalized operating cost improved by 30% from EUR 12 million to EUR 8.4 million, consolidating the cost rationalization actions we've undertaken since the fourth quarter of 2024 -- 2022 across all levels. As mentioned, normalized EBITDA was negative by EUR 2.1 million, as Carlota explained, with the debt restructuring plan, now implemented and the convertible loan converted the company started the second half of '25, working to reverse the situation and is ready to execute the business plan. We are already seeing positive evolution in profitability, efficiency and operational strength in line with business plan forecast. Energy Management has been delivering positive EBITDA from July '25 onwards. And we expect Solar and Storage to reach operational breakeven in the fourth quarter of '25 consolidating profitability in 2026. This slide shows the evolution of the normalized EBITDA by business unit over the last 3.5 periods, and I want to draw your attention to the remarkable progress in Solar and Storage activity. Solar and Storage shown in yellow demonstrates a clear and consistent path towards profitability. We've reduced losses by 83% since the first half of '23, going from minus EUR 12.4 million losses to minus EUR 2.4 million in the first half of '25. This is a structural transformation of the business. We've already consolidated solid unit economics and positioned operational breakeven below 100 monthly installations. Energy Management, shown in pink, experienced a temporary impact in the first half of '25 due to the cash protection measures during the transition period. But we've already seen a strong performance in July as operations normalize. Looking at the detailed energy management P&L, let me highlight the key dynamics. Revenue: The portfolio reduction reflects that our client acquisition strategy could not be fully executed due to the cash protection measures during the transition period. Portfolio quality: Despite the revenue decline in the portfolio we manage is very strong and robust. Following the customer migration to our highly cost-effective Tarifa Justa product in the second quarter of 2023, we've generated relevant savings in bad debt and cost-to-serve, while achieving historically low churn levels with 3.5 years of lifetime value. Gross margin at 15% of sales, gross profit generation was low in the first quarter of '25 due to cash protection. However, this situation has reversed since the debt restructuring plan went live in July. Normalized operating costs, we've achieved a 6% year-on-year reduction. Thanks to the Tarifa Justa migration and our cost reduction policy across all levels, marketing, brand personnel and OpEx. The cost structure is now optimized. With the debt restructuring plan implemented, the company started the second half of '25 working to reverse the situation and is ready to execute the business plan in '26. Looking at the detailed Solar and Storage P&L, let me highlight the key transformation drivers. Market in context. The Spanish residential solar market continued its contraction in 2025, driven by the high interest rate environment and the absence of government subsidies to stimulate the market, affecting the number of installations executed. Strategic focus: Despite this challenging environment, we made exceptional progress. Thanks to a strong focus on two key areas. First, increasing battery penetration from 17% average in the first half of '24 to 81% in the first half of '25, an extraordinary achievement that positions us as the European leaders. Second, cost efficiencies at all levels. Operating costs improved 59% year-on-year through significant cost optimization, including diversification of lead acquisition channels, headcount rightsizing to scaled levels, COGS optimization and OpEx reduction. PAT to profitability. The normalized EBITDA in profit of 59% demonstrates clear progress despite the challenging environment and restricted lead acquisition investment due to cash protection. This situation reversed with the debt restructuring plan in place in July of 2025, positioning the company progressively closer to breakeven and confirming this profitability path in 2026. Now, let's review our balance sheet position as of June of 2025. I'll present both the actual figures and the pro forma figures that include the EUR 15.5 million capital increase and the debt reclassification according to the debt restructuring plan. Total assets amount almost EUR 90 million. Non-current assets of EUR 44 million include the following key highlights. Intangible assets decreased by EUR 4 million as R&D investment was kept at minimum during the transition period. Deferred taxes was EUR 21.3 million and include EUR 11 million tax credit with non-tax credits added since 2023. Long-term accruals reflect our CAC investments calculated according to the customer lifetime value. Current assets amounts EUR 35.7 million. The debtors decreased by almost 9 million and amounted EUR 18.4 million. Short-term financial investments decreased EUR 4 million, primarily from derivatives. And cash kept around EUR 2 million, and it does not include the EUR 15.5 million capital increase registered in July. The cash was used to pay producers and other suppliers. This represents a more efficient balance sheet structure focused on operational excellence and during the transition period. Continuing with the liabilities and net equity side, let me highlight the significant financial milestone achieved through our restructuring. Net equity performance improved to minus EUR 2.6 million from minus EUR 28 million at June, actual figures. This reflects the capital increase offsetting the period's losses. It's important to note that the net equity of the parent company, Holaluz-Clidom, S.A., stands at a positive EUR 46.3 million. Total liabilities pro forma decreased EUR 102 million and with key transformation are now in debt structure. Non-current liabilities increased to EUR 37.9 million. This is positive news. The EUR 17.8 million increase represents short-term debt being reclassified to long term according to the restructuring plan, providing us with extended payment terms until 2028. Current liabilities decreased significantly by EUR 42 million and amounted to EUR 64.6 million. This improvement comes from two sources: first, EUR 19 million reclassification of short-term to long-term, I just mentioned; and second, a EUR 23.4 million reduction in accounts payable as the capital increase funds were used to pay producers and other suppliers. The pro forma balance sheet reflects a much more robust capital structure for executing our business plan with extended debt maturities and improved working capital position. Our net debt position pro forma in June stands at EUR 42.8 million, essentially flat versus EUR 41 million at year-end of 2024. What's important here is not the absolute number, but rather the transformation in debt restructure and maturity profile. Through the debt restructuring plan we've reclassified short-term debt to long-term debt with EUR 37 million now restructured as long-term liabilities versus EUR 20 million at year-end. This restructuring covers 100% of our debt with no write-offs and no discounts, extending payments gradually until final year of 2028. This provides the runway we need to execute our business plan and generate the corresponding cash flow. With this extended maturity profile and our improved operational performance, we have a clear path to sustainable debt reduction through business execution rather than financial engineering. Now, I'd like to hand back to Carlota to share how we are leveraging this stability to drive our broader impact and ESG commitments.

Thank you very much, Foix. With our financial foundation secured and operations optimized, we are now executing our comprehensive ESG strategy through '26, the impact and ESG strategy '24-'26. This framework consolidates initiatives across all teams to maximize Holaluz's positive impact on planet and society. On the environment front, we're deepening our climate commitment. We are expanding our carbon footprint calculations to include Scope 3 emissions and certifying them under ISO 14064. After submitting our reduction targets to SBTi, we are now executing our decarbonization plan. Our environmental management system already meets ISO 14001 requirements. On the social side, we focused on our people. We are implementing talent retention strategies identified through internal evaluations. We are advancing gender equality initiatives from our equality plan, while formalizing our company-wide diversity and inclusion approach. And we are establishing metrics and targets for human capital development and employee satisfaction. On governance, we are strengthening accountability and transparency. We are advancing on our sustainable procurement management with supplier ESG evaluation and approval processes. We are enhancing our reporting to align with upcoming CSRD requirements and demonstrate our commitment to transparency. And we have successfully engaged with all leading sustainability ratings, EcoVadis, B Corp, Sustainalytics, CDP and ESG Book and are now following their frameworks to benchmark and validate our performance. That's our strategy framework. Now, I want to show you the concrete results we are already achieving on climate. This slide presents our actual results published this year in our climate transition plan progress report, demonstrating tangible progress on our commitments. On environment, we've achieved significant milestones. Our net zero 2040 targets have been validated by SBTi, aligned with the 1.5 degrees pathway, placing us among global leaders in climate commitments. We calculate our carbon footprint annually across all scopes independently verified under ISO 14064 and publicly get registered in MITECO. This will be completed in November 2025. What's truly remarkable is our 8x positive climate impact for every ton of CO2 equivalent will meet, we avoid 8 tons through our business model. Our solar installations are carbon positive for 76% of their life span. And cumulative, we've avoided 2.9 million tons of CO2 equivalent since 2010. On the social side, we are enabling the energy transition directly. Our green energy and solar, storage services help customers and society avoid 193,000 tons of CO2 equivalent in '24 alone. Our customer engagement remains strong at 4.1 out of 5 satisfaction empowering households to take climate action through the Rooftop Revolution. We are also advancing our gender equality initiatives to ensure equity and our enterprise-wide diversity and inclusion approach. On governance, we have a tight team remuneration to climate and ESG goals, ensuring accountability. Our impact team drives strategy execution across all teams using the TFCD framework for climate risk management. We are engaging with leading sustainability ratings like CDP to strengthen our position as GreenTech company and build investors' confidence. This is not just a strategy. These are measurable results, demonstrating our commitment to sustainability and positive impact. Now, let me bring everything together with our key takeaways from H1' '25. We have secured our financial foundation with EUR 22 million capital increase complete in two phases, plus a comprehensive debt restructuring plan covering 100% of debt with no write-offs extended to '28, with approximately 70% eco-backed. This institutional backing validates our business model. We've delivered record operational efficiency, a 30% operating cost reductions through AI and automation implementations across critical business areas from EUR 12 million to EUR 8.4 million. This is a structural improvement that positions us to capture gross profit growth in coming quarters. We maintained a solid operational base over 255,000 contracts with 4.1 out of 5 customer satisfaction on Trustpilot, European leading 81% battery penetration versus the 30% Spanish market average, and a solid 45% gross margin per installation, demonstrating our strong unit economics. Our build-to-head capabilities are now meeting the market inflection point. Our proprietary technology platform is aligned with the upcoming regulatory framework supported by EcoGreen's line of EUR 22 billion available for green investments and falling equipment costs. This convergence transforms our capabilities into increasingly valuable assets. We have proven technology moat, regulatory alignment and a clear execution road map positioning us to capture the distributed energy opportunity. Most importantly, Energy Management has been delivering positive EBITDA from July '25 onwards after business normalization. And solar and storage is on track for operational breakeven in Q4 this year with 90 to 100 installations per month, consolidating profitability in '25. While H1 '25 was impacted by the timing of our financial restructuring, we've emerged with a much stronger foundation, the sustained improvement in gross profit across both businesses combined with our agile efficient cost structure, leveraged by AI and automation positions to achieve operational breakeven during H2 '25. This milestone will mark the beginning of a new phase of profitable and scalable growth driven by technology, AI and automation, guided by our firm commitment to sustainability, positive impact and value creation for the people and the planet. The convergence of our build-ahead capabilities with market tailwinds positions as better than ever to execute our plan and lead the energy transition. This concludes our formal presentation. For any questions or additional information, please contact our Investor Relations team at [email protected]. Thank you all for your time and continued support as we drive the Rooftop Revolution forward. [Foreign Language] Either we will find a way or we will make one. The Rooftop Revolution has no ceiling. Thank you very much.