Holaluz-Clidom, S.A. (HLZ) Earnings Call Transcript & Summary

Good morning, everyone, and welcome to Holaluz's Full Year 2024 Results Presentation. Thank you for joining us today. I'm Carlota Pi, Co-Founder and CEO of Holaluz, and I'm pleased to be sharing our results for the fiscal year ended December 31, 2024. I'd like to introduce Foix Valde, our CFO of Operational Finance, who joins me today and will be presenting our financial results. I want to remind everyone that our discussion today may include forward-looking statements, which reflect our expectation as of today. Actual results could differ materially from what we discuss. This slide has 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 business model. Then Foix will review our 2024 financial results in detail. And finally, I'll outline our aims for 2025. 14 years ago, we decided to change the world by connecting people to green energy with a clear vision, to decarbonize the economy through technology, data and people. Today, that vision is more alive than ever. We're building Europe's largest and most impactful green energy community by unleashing the full potential of electrifying energy demand through scaled energy management and distributed solar and energy storage solutions. As a business, we connect people to green energy through the heavy use of tech and data. I've been leading the energy transition as the disruptor for the last 14 years. We operate a unique business model combining solar, storage and energy management operations. We offer the most compelling customer proposition in the market, focusing on maximizing savings and customer satisfaction, have built a strong foothold with our Tarifa Justa subscription product. And lastly, we see significant growth potential ahead with solar installation penetration in residential markets still under 5% in Spain. While many companies in the energy transition space have disappeared, Holaluz remains standing with our eyes firmly on the future and a clear direction towards a 100% green planet. Our business model represents a fundamental transformation of the energy landscape. By vertically integrating distributed solar generation and storage with energy management, we've created a sustainable competitive advantage in sourcing costs, while offering the best product with the largest savings in an easy way to our customers. We are transforming the current electricity generation model from a centralized oligopoly, which is polluting and expensive by nature, to a decentralized, decarbonized, democratized and affordable clean energy model that leverages the proximity grid. We are already providing green and affordable electricity through a subscription-based product to thousands of people with the potential to reach millions more. Most noticeable, we are sophisticating the market with our unique value proposition. While average players can only provide basic solar installations or limited flexible assets offering, Holaluz delivers maximized rooftop potential, home energy management operator integrating solar panels, batteries and EV chargers, virtual power plant ready installations and capabilities, the most competitive subscription-based energy management product. Everything is made possible through our heavy use of tech and data. Our ecosystem connects three critical components: first, energy management. Supplying green electricity to customers without solar; Second, solar and storage businesses. Transforming rooftops into distributed energy production and storage centers; our technical platform is the third, centrally optimizing energy flows and customer experiences. Together, these elements create a powerful flywheel effect, continuously optimizing economic value across our portfolio and we continue developing an intelligent energy management platform using data, software, batteries, virtual power plants and integration technology to optimize and distribute green electricity. Our customer value proposition delivers on multiple fronts: maximum savings through optimized solar and storage with our newly launched Tarifa Justa for solar customers with battery that offers zero euros electricity bill for 5 years guaranteed by contract. We provide an end-to-end relationship from installation through ongoing energy optimization. Our subscription-based fixed pricing warranty savings to customers and margins to Holaluz. We have the highest-rated ESG credentials and 100% renewable energy sourcing for hundreds of thousands of contracts. So why have we been able to deliver on this promise and why are we better prepared than ever to continue growing? Because our recurrent revenue model proves its strength. We generate approximately EUR 15 million per month through our energy management technology platform. Because we continue to enjoy the trust of more than 300,000 active contracts, reinforcing the strength of our brand, our value proposition and our relationship with each home and business that accompanies this revolution and because our team keeps growing. We closed the funding round, refinanced our debt and at the same time, we continue selling, installing, serving our customers, developing products and technology, driving regulation and operating with excellence without rest and with a long-term focus. This year, we also integrated our first artificial intelligence tools to improve many of our operational processes. From debt management to marketing, customer service and finance, AI has been key to optimizing our operations. Thanks to this implementation, we've achieved the lowest cost to serve a contract in our history. The company's transformation through AI is one of our strategic pillars for 2025 and this is just the first of many improvements to come. Now I'll hand over to Foix to present our financial performance for 2024.

Thank you, Carlota. 2024 was a decisive year characterized by a resilient performance despite significant industry headwinds. We achieved a positive normalized EBITDA of EUR 3.5 million. We continued optimizing operations through decisive actions led by our leadership team. AI-driven efficiencies were implemented across the business. We continued innovating with market-leading products, and we maintained our market share, particularly in solar. Our key performance indicators demonstrate our progress. Financially, we have a stronger EBITDA result with 38% year-on-year reduction in operating costs, and we have consolidated the customer lifetime value to acquisition cost ratio at approximately 4. Operationally, our customer portfolio contains over 300,000 total energy contracts, of which more than 15,000 solar contracts. It must also be remarked that in 2024, we tripled the battery attachment rate versus 2023, achieving a 45% by year-end. From an ESG perspective, we continue to increase our Trustpilot customer satisfaction rating, achieving 4.1 out of 5 by the end of 2024. We're very proud to have a team comprised of more than 40% of women, and we have avoided 2.9 million tons of CO2 equivalent emissions to date. Looking at our energy management business, we generated positive EBITDA of almost EUR 1 million and a normalized EBITDA of EUR 14.7 million. Despite a 34% revenue decline driven by lower electricity prices, our gross margin expanded to 21%. Thanks to our Tarifa Justa unique advantages for both customers and the company, we've been able to reduce bad debt losses by 64% with historical KPI values in percentage of defaults and percentage of recovery. Operating costs decreased 20% year-over-year, driven by the successful deployment of AI tools to optimize operations and customer savings. The energy management P&L shows a revenue figure of almost EUR 170 million, down 34%, primarily due to lower electricity prices. Note that these figures are without the route-to-market turnover as the revenue from this business unit correlates 100% with energy prices, and would generate misleading conclusions on those KPIs related to the whole turnover of the company. Gross profit amounted to EUR 35.5 million, and commercial margins improved to 21%. We've consolidated a very strong and robust portfolio since the customer migration to our Tarifa Justa product, generating relevant savings with historically very low bad debts cost and cost-to-serve. In our Solar and Storage business, normalized EBITDA improved by 45%, closing the year with EUR 11.3 million losses. Commercial margins expanded through larger system sizes and battery penetration reaching 45% by year-end compared to 15% in 2023. We implemented significant cost optimizations and AI-driven efficiencies. And last, but not least, Holaluz maintaining market share at approximately 2%, despite the challenging conditions faced throughout the year. Such market headwinds included high interest rates, lower electricity prices and the phaseout of subsidies. The solar P&L highlights are revenue of EUR 12.2 million, reflecting broader market contraction; the gross profit per installation was up 54% on average despite selling fewer installations than last year. The average selling price increased by 16% and reached an average of more than EUR 10,000 per installation. Operating costs reduced by 49% year-over-year. And as a consequence of all these achievements through a strong focus on increasing average selling prices per installation with larger installations and more batteries, cost of sales optimization and operational efficiencies, the normalized EBITDA improved by 45%. On a consolidated basis, revenue was EUR 182 million, down 36% from 2023. Again, note that these figures are without the route-to-market turnover as the revenue from this business unit correlate 100% with energy prices and will generate misleading conclusions that those KPIs related to the whole turnover of the company. Gross profit reached EUR 40.9 million with an improved margin up to 23%. Normalized operating cost decreased by 38%. And thanks to this efficiency and savings, the normalized EBITDA was positive, reaching EUR 3.5 million. Despite complex market conditions in solar and headwinds in energy markets, unit economics excel in both businesses, improving margin over sales versus 2023. Our normalized EBITDA evolution is strong with sustaining positive performance, a trend that clearly demonstrates our progress towards sustainable profitability. Let's now move to our consolidated balance sheet at year-end. Total assets were up to EUR 110 million, of which EUR 59 million correspond to noncurrent assets and EUR 51 million to current assets. Working capital was optimized with significant reductions in trade debtors, thanks to the positive effect coming from the Tarifa Justa migration. Net equity of the parent company amounts EUR 34.5 million, including EUR 4.8 million capital increase from Icosium investment. It is important to note that even though the consolidated net equity is negative due to the net equity of the parent company amounts to EUR 34.4 million, there is no equity imbalance. These negative figures come from the accumulated losses by the subsidiary, Clidom Solar which have already been balanced through equity loans. Total liabilities were EUR 127 million. Comments on long and term borrowings come in the following slides. Current liabilities decreased by EUR 33.6 million year-over-year and amount EUR 107 million. We have successfully approved a debt restructuring plan with our financial creditors with pending judicial approval. At year-end, the net debt position amounted to EUR 41 million, a EUR 24.3 million reduction from 2023. This is mainly due to the cancellation of the financing SEPA credit lines, a EUR 2 million VAT credit line cancellation and the return of the principal of the launch until the standstill agreement signature, valid since August 1 of 2024. Such agreement moved to a complete debt restructuring plan that will become applicable with the judicial approval. As a consequence, the debt capacity has evolved significantly closing 2024 with a debt capacity of almost EUR 44 million. The restructuring plan establishes a sustainable debt evolution until 2028 that will allow the company to execute the business plan. Only 1% of debt return is planned for 2025, minimizing the cash impact. Our financing highlights include a strategic EUR 22 million investment from Icosium investment in two phases, EUR 6.5 million already completed in March and EUR 15.5 million in the second phase. The aforementioned restructuring plan was approved by a significant majority of creditors in March of 2025. Now I'll hand back to Carlota to discuss our ESG milestones and future outlook.

Thank you very much, Foix. In 2024, we achieved significant ESG milestones. Environmental, SBTi approved our emission reduction targets. We published our first Climate Transition Report and achieved 2.9 million tons of CO2 equivalent emissions avoided since the company's inception. In social, we are building Europe's largest energy community, maintaining gender diversity with 40% women on our team and delivering exceptional customer satisfaction. And in governance, consolidation of our robust policies and frameworks while actively influencing the energy sector towards the renewable energy transition. All these with the recognition of the top national and international organizations. We got certification since 2018, #1 worldwide in Sustainalytics ESG risk rating; EcoVadis Gold Medal with 73 out of 100 points, 4.1 in Trustpilot, committed as a business to the 1.5 degrees climate initiative, with excellence in operational certifications and management systems like ISO, transparency Adigital, in a socially conscious and respectful environment for our employees and all stakeholders. Looking ahead to 2025, we'll continue with our focus on continue the AI-driven operating cost optimization, increasing installations, selling ticket and reaching solar breakeven. Product innovation, including Spain's first Virtual Power Plant and continue developing our Tarifa Justa offering while maintaining strong margins through technology optimization. The company's transformation through AI is one of our strategic pillars for 2025, and we've only begun to implement all the potential improvements. Moreover, in the coming months, we'll be inviting all shareholders to a special event, we will present our updated strategy following the recent investment from our industrial investor, Icosium Investment. This strategic partnership marks an exciting new chapter for our company, and we are eager to share our redefined vision and road map with you in detail. So wrapping up. First, we delivered EUR 3.5 million in normalized EBITDA with record customer profitability. Second, we increased margins through AI-based efficiencies and cost reduction. Third, we secured EUR 22 million in strategic investment. Fourth, we successfully restructured our debt with strong creditor support. And fifth, we maintained industry-leading customer satisfaction. I want to extend a special thanks to our team who have worked relentlessly to deliver these results and to all our stakeholders, customers, suppliers and creditors for their continued support as we focus on our goal to fully decarbonize the world. With a firm purpose, a solid foundation and unstoppable team, we are ready to continue leading the transformation of the energy system because we believe more than ever than connecting people with green energy is the most direct path towards a just, clean and shared future. Either we'll find a way or will make one, as Hannibal Barca, commander of the Carthaginian army used to say. The rooftop revolution has no ceiling. This concludes our formal presentation. If you have any questions, you can reach our Investor Relations team at [email protected]. Thank you. You may now disconnect.