Otovo ASA (OTOVO) Earnings Call Transcript & Summary

Good morning, everyone. It's with excitement and trepidation that we present today's news of a planned combination between Otovo and Onvis. And we will today go through an agenda consisting of a presentation of the combination, an introduction of and by the new management before opening up for your questions and our answers about the Q3 earnings, the combination, new capital, whatever questions you have. I'll be starting out today. I'm Founder and CEO of Otovo. I'll be joined by John Berger, the Founder and CEO of Onvis. This morning, we announced a transaction that creates a combination of Otovo in Europe and Onvis in the U.S. It's a 60-40 exchange ratio. And Onvis today operates as Otovo USA in the U.S. and it creates the first AI-driven home energy service and financing platform present on both continents. By combining Otovo and Onvis, we get access to 2 management groups, lots of experience, veterans from Sunnova and the solar industry in the U.S. and my team of tech creators and platform builders in Europe. John Berger will become CEO of the combined entity, and I will move into a role as Chief Product Officer with responsibility for solutions, product and marketing. We also announced that we are raising new capital to fund the company. And we have NOK 45 million committed in a raise at NOK 1 per share. That is 2% below the 60-day VWAP. It's at a premium to yesterday's close of more than 40%. That NOK 45 million raise is supported by leading shareholders, prominent shareholders on both the Onvis side and the Otovo side and new institutional investors. The capital raise will go on, on both the American and European side. And the gross proceeds are planned to land between NOK 45 million and NOK 80 million, roughly $4.5 million and $8 million. This funds growth, geographic expansion, development of technology and new sales. The more we raise, the faster that will go. The new capital and the new management combined to accelerate our new strategy to focus on service and maintenance, rapid repairs, and grid services. Those are segments with high margins and recurring revenue. We will be targeting the tens of millions of homeowners in the United States and in Europe who have home energy assets like solar PV systems, batteries, generators, heat pumps and other technologies. And we will expand our leasing platform for PV and battery, of course, as a continuing affair. Overall, we create an all-in-one energy service and financing platform operating on 2 continents. It's really the first company to solve the biggest problem in the PV industry, the long-term problems of creating 25 years of well-working systems financed and serviced with maximum uptime. Our belief is that consumers have been shortchanged for a long time. Now we have the solutions for them. We also aim for positive operating cash flow in Q2 2026, excluding onetime expenses such as severance and contract termination payments, et cetera. Good. Let me now dive into the new combined product. We're creating a leading all-in-one home energy service and financing platform operating in the U.S. where our U.S. headquarters are in Houston and in Europe. It's 2 unique businesses, creating a combined global leader. We've built out our ability to provide value for customers through solar, through battery and through leasing in a total over 10 years. And then we will be expanding that with more recurring revenue, value-creating, revenue stacking business lines where service is front and center, but where we will also expand to retail energy grid trading and other upside as we go. Let's double-click on that service element. Millions of customers across Europe and in the United States have invested in solar PV and batteries. The problem is that when these valuable assets that create savings for them every day in the form of lower electricity bills, trading upside in the battery, stop working because of malfunctions, weather, or faulty installations, they have no one to call. Why? Because as these systems have aged and the industry has gone through massive fluctuations, many of the original installers don't exist anymore. People find that they have slow unreliable repairs for the big investments that they've made. That creates costly outages and value that is lost to the consumer. We're confident that we can target these more than 30 million homeowners on both continents and tap into the $50 billion aftermarket of servicing and maintaining systems. In fact, we're well on our way to do that. And over the last 5 years, we've built a vast leasing portfolio in Europe, where we get paid every day to service and maintain those systems. In the third quarter of 2025, we also initiated a subscription membership for service where customers get virtual help center available 24/7, rapid response and discounts on repairs. And we can do remote diagnostics by putting their systems up in the cloud and telling people that it's time for repairs or that something is malfunctioning on their system, like many of you probably experience with your cars today. Combined, we now have about 15,000 subscription customers at the end of Q3. These customers are either on leasing or where they -- we get paid for the service or they're paying service subscription subscribers with EUR 108 per year upfront payment or they pay as they go at EUR 12 per month. 97% of subscribers have chosen the upfront -- chosen the upfront payment with EUR 108 upfront. And we are able to acquire these customers, as indicated in the message released in September about solar customers we acquired at about half the yearly revenue from these customers. So it has -- it's a very attractive segment for us. 15,000 today, ambition of 65,000 next year, 200,000 two years from now. How can we achieve that impressive growth? Well, through multiple avenues. First, Otovo has a customer base of more than 40,000 people. We want to tap into that. Our installer ecosystem has more than 300,000 systems that they've built over time that we can create service agreements on. On top of that, we can do traditional performance marketing, online marketing to acquire customers against marketing payment. And then a third and exciting avenue is fleet deals to service systems owned by financial owners of lease paper or by doing service agreements for original equipment manufacturers from the big brands in battery, inverters, et cetera. And we think the combined management has access to these companies in an extraordinarily privileged way so we can keep growing that segment. And then fourth, we can acquire customer books, and we're seeing a lot of opportunity there. Customer books from companies that are about to go out of business or out of business, where their service -- where their customers are without any coverage of service, that's an attractive segment that converts really well. And based on this type of customer acquisition, we believe we can grow very, very rapidly. That leads to a very upbeat outlook for us. We believe that the potential here is immense on both sides of the pond. To build on the direct sales, the lease segment, we build this service segment and other solutions, both in the U.S. and in Europe. In order to make sure that we have the funding to assure this growth, we are completing a fund raise of NOK 45 million to NOK 80 million. That is happening on both sides of the Atlantic, more on that in a separate -- or in the stock exchange notice. We have a backlog of projects that will be installed, helping us finance this transition. And we've done a cost reduction program that takes effect during this quarter, allowing us to stabilize cash flow on existing Otovo before adding growth from service from the Service segment. We are well funded for 2026 and look forward to attacking that, with a product line that has very good EBITDA attributes. Now let's move on to introducing John Berger, who when this combination completes he's intended to become the company's Chief Executive Officer. John, over to you. Let's get introduced to the new CEO.

Well, good morning. Thank you, Andreas. And this has been a long time in the works. I've admired what Andreas and the team have done with being the founder of Otovo. He's done -- has a lot of vision and look forward to working with him to take that vision, make it a reality and take it to the next level. When you look at the 3 things that we see as far as attributes of the company and its strategy, the first one is AI. This is not a buzzword using AI and just to get notice. We've actually built an entire software stack app on the that we are going to use across the new Otovo. That has crushed out in an immense amount of cost. It's crushed out both in CapEx and OpEx and has created agents that do work far more efficiently. The second is, is that service, as Andreas said, is very underwhelming in both the EU and the United States. There's 33 million homes, as Andreas pointed out, that have some sort of power generation. And of course, that number is climbing. There is no one that comes to that homeowner and business owner is an also a market opportunity for us and says we are going to be there to deliver and fixture power system, solar system, batteries, et cetera, on a timely basis, 48, 24, 12 hours or less basis. We are doing that, and we will spread that out. We will be the best in service, and we'll have a relentless focus on the customer. As well as what the last piece is this space has been dislocated to say the least. There's a lot of value and opportunity out there, and we see an immense amount of ability to buy other service companies in both the U.S. and the EU. And indeed, we even have some under LOI that contain tens of thousands of customers. So we see this as a very great opportunity to come in and be greedy when others are very fearful. I would like to point out that the company will have plenty of cash. We recently just raised cash. We'll be able to bring that cash to the table plus the additional cash we'll raise. We'll be able to drive down the cost of AI, and we have the right business model and strategy to generate significant net income growth, and we'll be focused on generating that net income.

Wonderful. And with that, we'll open up for the Q&A section. Please don't be shy in leaving your questions. So maybe first, a quick disclaimer. I see that there's a type on the minimal amount raised in this version that is not correct here. So it's NOK 45 million in case that is ambiguous. So I refer investors to the material that is published on the Euronext Stock Exchange for the correct amount there. Question is combination rationale. Can you -- the structure and valuation exchange ratio of the deal? I guess that means can you explain the structure and valuation? Yes, the structure is quite simple, in fact. Technically, this happens as an acquisition of Onvis Inc by Otovo ASA. Onvis Inc, is the American entity that is a part of the combination. That acquisition happens at a valuation of NOK 189 million or thereabouts, creating a 60-40 exchange ratio between Otovo stock price one and Onvis at that valuation. Now that creates a combined entity of NOK 280 million plus NOK 189 million combined valuation. And then we're doing a capital raise of NOK 45 million to NOK 80 million on top of that. So that will be the structure of the cap table after the transaction and capital increase happens. The rationale, my view is that as explained in this presentation, both the European and the American energy system and the homeowners that exist in it is uninsured. People have been overpromising on day 1, under-delivering on day 2 to 10,000, as this magnificent technology of solar panels, batteries provide value for customers every day, not only if it works. And so we believe that combining these 2 companies, we create an entity that can really address that, make people happy with their solar and battery systems every day for 20 years. So for me that at least is the motivating factor. Tom, do you want to add something to that?

Yes, certainly, when you look at the ability to solve a problem that's pretty acute for customers, especially as utility bills are rising because of AI energy usage, those panels underperforming actually leave a lot of dollars on the table that are very important to both American families and the families and the European Union, countries of the European Union. And so what we see is there is a vital service that needs to be provided to make sure that these assets are treated accordingly, just like utility assets, and they are repaired very quickly to provide that power to those homeowners to lower their bills and increasingly providing very important and needed financial income for consumers.

You are talking about quite rapid growth for the service business. Where will this growth come from? John, do you want to take that?

Sure. You made mention that there is several different ways to do this. And I can tell you, we're already executing this in both the United States and Europe, as you mentioned earlier, Andreas. First one is there's a lot of service companies out there. Frankly, there's a lot more than I thought there was. They're stacking up. We have a very full pipeline. We have some under LOI. Are these small? They're small, but there's tens of thousands of customers in some of these in both the EU and the U.S. So I would say that we can get to somewhere between 50,000 and 100,000 very, very quickly just with what we see. And frankly, we have a lot under LOI. Customer books from installers, obviously, we know a few contractors worked with some of the best in the world, and we've had a lot -- already had some success in taking over some of those customers. Why is this an opportunity? Because there's a big difference between installation and service. And mixing those 2 together has been the industry's mistake, both on solar and in generators. We're the service, not the installer. OEM partners. We have been fortunate to have a number of relationships. We have some of those under contract, and we have been executing those, and we look forward to sharing that with the Europeans and spread out and become that one-stop shop for these important partners, global partners of equipment manufacturing and so forth. So that they can make sure that they have their customers taken care of on the service side while they focus on making incredibly good products. Retail power has been a huge win here in Texas and the United States in acquiring customers and optimizing both the retail power around the customer where you can in the deregulated markets, which is all of the European Union and providing the VPP or the power that goes back into the wholesale system and providing more value for the customer. Of course, there's referral. We've gotten a lot, a lot of those customers and more and more coming our way. And then the last we're able to provide with this combination is the financing in those applicable markets where customers come to us as you've been doing, Andreas. And I did a little bit of it in the United States before on the financing side of things. So all this stacks up. If we had 250,000 customers, which is our target by 2028, -- we feel like that would generate a significant amount of net income. I know we're going to put forth a plan when we close this transaction in December. We'll have more details out for investors there, but it'd be quite exciting to say the least. And if you look at 250,000 customers, 33 million and climbing, that's pretty small. So that's an absolutely incredibly doable and I'm looking forward to doing this with you in record time.