Otovo ASA ($OTOVO)

Good morning, and thank you for joining us for Otovo's First Quarter 2026 Earnings Call. I am John Berger, Chief Executive Officer, and joining me today is Jennifer Santoscoy, our Chief Financial Officer. Please submit your questions in the event page, and we will address them at the end of our prepared remarks. Moving on to the first slide. I will begin with our progress against the strategy we announced earlier this year. Jennifer will then take you through the financial results before I return to cover our business highlights and outlook for the remainder of the year and then open for your questions. Q1 2026 highlights in Otovo's 2025 annual report, we made 3 commitments to our stakeholders. First, scale the business through accretive acquisitions at low multiples, organic growth, and selective OEM and asset owner partnership activity across Otovo's expanding geographic footprint. Second, tightened capital allocation improve cash management, sharpen our execution and make better use of technology, including AI across the Otovo's platform and lower overhead by rationalizing less profitable operations. Third, invest in our Endurance system to create profitable operating leverage, expand EBIT margins and naval synergies in our M&A. We accomplished a lot in the first quarter. We acquired 3 customer portfolios in Europe, solar service professionals and EnergyAid in California, more recently, SunSystem Technology in the Northeast United States and establish a relationship with Green Panel. We've ramped up build service activity and grew membership to 20,000. We reduced operating expenses by $2 million year-over-year and improved adjusted EBITDA by $0.5 million. This was despite lower revenue due to our strategic pivot away from the new build segment. The Endurance rollout is underway, and we've identified $4 million in cost reductions, including EnergyAid synergies. The full effect which is expected in the second half of 2026. So where are we going from here? We will do more accretive M&A, executing year 1 accretive acquisitions at low multiples. We will continue to rationalize costs across both the existing platform and the newly acquired companies. We will complete the Endurance rollout and we will improve margin and sales through M&A, organic growth and partnerships, scaling a platform that is designed for accretive growth. Otovo is an AI-powered home and commercial energy services consolidator. We will provide monitoring, repair and memberships for solar, batteries and EV chargers. Across Europe and the United States, there are roughly 37 million behind-the-meter power asset installations. And we estimate over 1/3 of these are orphan following the recent bankruptcy wave among installers, meaning the owner has no service provider to call when their systems don't perform as expected or failed outright. At the center of the model is Endurance, our proprietary AI platform and our margin engine. It automates intake, diagnosis, dispatch and scheduling, increasing customer value while lowering our cost to deliver. Otovo is a market consolidator with a proven track record that includes 7 acquisitions since the 2025 merger in both Europe and the United States, capturing significant synergies and acquiring customers at a fraction of the normal customer acquisition cost. We expect 2026 revenue of approximately $80 million to $90 million and adjusted EBITDA of approximately $2.5 million to $7.5 million. We have roughly 30,000 customers including EnergyAid, around 20,000 memberships and an accumulated legacy customer and monetary base of $1.4 million. There are more than 37 million asset owning homes and businesses across the United States and Europe, working more than 13 million of which are orphan customers who no service provider. We estimate the annual service addressable market and more than $55 billion across the 2 continents. 3 dynamics that find this market. First, the service gap itself. We estimate that over half of the residential solar installers that were operating in 2020 have exited the industry, leading millions of homeowners with no one to call when their systems fail. Otovo bridges gap by giving these systems a home for best-in-class service; second, a fragmented market primed for consolidation. In the United States alone, there are an estimated 300 service-only companies and over 10,000 installers with some sort of service operations. Most are running expensive software stacks and serving only their local market and depressed valuations create an ideal acquisition environment for us. Third, improving willingness to pay. Demand for Otovo membership has grown tremendously in both the United States and Europe, especially in regions with aging systems. Our business model generates up to 5 revenue streams per customer with the target average revenue per customer of roughly USD 1,400 per year for residential at a gross margin of 45%. For a residential customer, those streams are in the Otovo Care membership, repair and field service, equipment upgrades, retail power and virtual power plant or grid services. Commercial customers generate meaningfully higher revenue at about USD 4,900 per year per customer. It is important to be clear that Otovo Care is not a warranty or an insurance product. It is a membership that provides monitoring, priority response and repair discounts. We bundle these services because memberships established long-term relationships, upgrades expand the asset base per account and retail and bridge services did monetize that portfolio at attractive margins. Endurance is our proprietary technology stack, which spans the entire business and enables the extensive use of agents. It covers 4 areas: marketing, sales, operations and supply chain. Industry EBIT margins sit around 10% to 20% today. At scale, we are targeting a much stronger EBIT margin of 20% to 30% with Endurance, owning the software stack and enabling efficient operations are the primary drivers of that expansion. This is not hypothetical. Endurance is already running revenue-critical workflows across all 4 areas today. In marketing, lead intake flows directly into our system and is handed off to a unified inbox where AI handled customer threads are already in production. In sales, AI phone agents look inspections, 24/7, allowing customer response on weekends and after hours. We have a 0 touch sales path where customer inbounds goes straight from the AI phone agent to the technician on site with no human in the middle. In operations, we have a unified inbox combining e-mail, SMS and voice on the same customer record, geofenced job sites and technician mobile auto tracking. And in supply chain, we track inventory across warehouses and trucks, run 3-way match purchase orders with ramp integration for one-click bill approval and handle return authorization end-to-end with technician uploaded purchase orders from the field, eliminating the return trip. Our vision is for the technician to be the only human touch point. We have 3 growth channels. First and foremost is M&A, the roll-up of service companies and customer books. We acquire local service companies taking band technicians and customer contracts in one stroke. And we buy customer books from failed installers and other companies at cents on the dollar, and deploy Endurance after closing to cut software, dispatch and call center costs in addition to increasing operating efficiency. Second, our OEM and asset owner deals. Multi-geography contracts that drive scale. We lock in OEM service partnerships across our footprint and sign multicountry deals with asset owners, such as solar funds, utilities and leasing platforms. Each new geography compounds the value of our existing OEM relationships. Third, a direct organic acquisition. We have a 1.4 million legacy customer base inherited from predecessor companies and brands. We market directly into that database to convert customers through Otovo Care memberships and provide upgrades and resell power, each new acquisition expands the pool of those legacy customers. This slide lays out how we've been consolidating a fragmented market through the acquisition of customer books and service companies. On customer books, we acquired 3 contact lists across Germany, the Netherlands and Norway, leading to the thousands of orphan customers converting to Otovo Care at a very reasonable customer acquisition costs. The SSP acquisition with our entry into California, the largest residential solar market in the United States. EnergyAid adds approximately $19 million in revenue, 30 bands and 29 technicians. More recently, we signed an LOI to acquire SST, complementing our current service portfolio and giving us coast-to-coast footprint, which will enable more OEM service partnerships. On partnerships, the Otovo Green Panel relationship is a pan-European, Israel-based field services company that combines our footprint with their execution capability. Our global OEM service contract spans 5 countries with more than 250,000 installations at launch, our single largest European growth catalyst. The table on this slide lays out how we've been consolidating a fragmented market across 2025 and 2026, organized into 3 buckets: European customer books U.S. service providers and partnerships. Starting with customer books. We acquired 3 contact lists from Zolar, Soly and SES across Germany, the Netherlands and Norway, picking up roughly 30,000 customer records. About 5,000 have already converted to its Otovo Care at a very attractive customer acquisition cost. In the United States, we have built a Cosaco-service footprint through 4 transactions. Freedom Power closed in the first quarter brought us over 400 commercial systems and roughly 70 megawatts of capacity across Texas, Florida and Colorado. Our entry into commercial solar and storage operations and maintenance. Taken together, these transactions move Otovo from pure residential origination to recurring service revenue across both residential and commercial on a platform that now spans Europe and the United States. I will now hand over to Jennifer to go through the financial results for the quarter.

Thanks, John. Let me pick up where you left off on the P&L. Our cost cuts in the European business are on track even with a full quarter of consolidated costs from [indiscernible] SSP. Looking at cost by category, excluding nonrecurring noncash expenses, operating expenses were down $2.2 million year-over-year. We reviewed European payroll by $2.3 million, which was partially offset by the addition of [indiscernible] SSP payroll in the United States. Marketing was related by $2.4 million to $900,000 as we reduced our reliance on performance marketing and shifted away from higher customer acquisition cost business segments. External services rose slightly and other operating expenses fell by $700,000. We've adjusted OpEx to provide color around our recurring cash experiences. Adjustments were made for noncash balance sheet changes and nonrecurring expenses, such as sovereign M&A and restructuring costs to show the progress the Otovo team has made to the underlying cost structure. Moving to the balance sheet. Cash position nearly doubled to $15 million following a $16.6 million private placement completed in March. These proceeds are earmarked to finance the EnergyAid acquisition, which closed in April support our acquisition strategy and prepare for a potential U.S. dual listing. Interest-bearing debt was reduced to $900,000 and our working capital tightened as we are freeing up with the transformation into a more asset-light business. With that, I'll hand it back to John.

Thank you, Jennifer. We exited 2025 with 18,000 customers. As of the first quarter of 2026, we are 30,000 customers strong and growing, driven by the acquisitions of SSP and EnergyAid and organic growth in our existing markets. From here, we expect to double our number of customers to 50,000 by year-end 2026, 170,000 by year-end 2027 and 275,000 by year-end 2028. The path runs from expansion across new U.S. markets and opportunistic acquisitions in Europe to building density in key solar markets to maximize adoption and minimize costs, establishing Otovo as a leading home and commercial energy service platform. In short, this is the move from early traction to rapid scale on the AI-powered platform we are building. Endurance is replacing the third-party software stack across 3 organizations with a company-wide rollout expected to be complete in the third quarter of this year. At EnergyAid, we are retiring the enterprise CRM and Service Cloud and integration middleware, replacing the third-party call center platform with Endurance voice and AI and consolidating AI operations. In the legacy Otovo Cloud, we are retiring the European marketing automation platform, migrating hyperscale cloud infrastructure to a lower-cost European host or a large run rate savings and replacing third-party voice over IP and our in-house real-time and IT stack. And at SSP, we are collapsing sales conversation intelligence, messaging, in SMS feels, retiring the field service CRM, routing and inventory apps and subsuming accounting, workflow training, more than 25 back-office tools. Together, these actions represent approximately $4 million in identified annualized savings. This excludes additional savings from engineering, consolidation, infrastructure retirement, and lease consolidation. The full effect comes later this year in the third quarter with little to no effect in the first quarter of 2026. You've already seen this map in the company overview where I walk through the strategy, I won't repeat that. What I want to do here is show you what we actually executed so far in 2026. That's what's highlighted on the slide. The story this quarter is a shift in what we acquire. We removed from buying contactless to buying service capacity, technicians and bands and customers. That's the asset-light service layer of the new Otovo being built in real time. In the quarter, Freedom Power took us into a new vertical, commercial solar and storage O&M, bringing 400-plus commercial systems and around 70 megawatts under management for $0.85 million. And SSP was our entry into California, the largest residential solar market in the U.S. and a $0.4 million purchase price that brings $2.5 million of revenue with it. Since quarter end, we've gone further. We closed EnergyAid, the largest of these an $11.5 million enterprise value transaction, adding roughly $19 million of revenue, 30 bands and 29 technicians across California, Arizona and Nevada. We've signed an LOI for SunSystem Technology, a 10-year-plus O&M business operating in 14 states with around $14 million of revenue for $0.77 million in cash plus an earnout. SSP is what gives us a genuine coast-to-coast footprint. And that footprint is what makes us credible for larger OEM service partnerships. And the Otovo GP relationship, our pan-European field services partnership becomes operational in quarter 2. Two things to take away. First, capital discipline. SSP and SST each bring revenue several times the purchase price. Second, the aggregate, we've added on the order of $35 million of service revenue and a physical service network that now spans both U.S. Coast and Europe. This is the service engine, the new Otovo model runs on. The EnergyAid integration is on track and in fact, ahead of schedule. EnergyAid's leadership, especially in sales, were critical talent additions, and membership sales are ramping swiftly thanks to an EnergyAid-inspired revamp of our U.S. membership sales effort. We see approximately $3 million of total cost optimization opportunity at EnergyAid. We grew our band and technician fleet to nearly 50 at the end of quarter 1, and we expect SST to nearly double the size of our technician fleet. Let me summarize the quarter in 3 takeaways: a transforming business mix, deep operating expense cuts, improving margins and accelerating sales. First, the business mix is changing with our focus on service and subscription our memberships. We are executing a profitable shift towards servicing upgrades, growth is improving as services ramp and memberships grow, and gross margins are improving on the same dynamics. Second, we have realized deep operating expense costs. Our cost base fell 23% year-over-year despite efforts on ramping up our service business. With further reductions expected in the upcoming second and third quarters as integration is completed, both on an organic and pro forma basis. Third, on near-term catalyst organic sales are accelerating. EnergyAid adds $19 million of annual revenue, our commercial business is granting. Insurance is rolling out by the end of the second quarter and further acquisitions are in the pipeline for the second half of 2026. The combined effect is a materially higher annualized run rate by year-end. Our outlook combines pro forma guidance in an active M&A pipeline. For 2026, we are guiding revenue of USD 80 million to USD 90 million, adjusted EBITDA of USD 2.5 billion to USD 7.5 million and 60,000 customers. On the pipeline, we are in active definitive discussions with 3 companies representing more than $40 million of revenue potential and $10 million of EBITDA potential. With an additional short list of 4 companies representing more than $70 million of additional revenue potential. To reiterate, our target operating model captures the benefits of customer growth on a scalable platform, together with the savings from the Endurance rollout and expansion. At scale, we targeted a gross margin of approximately 45%, EBIT margin of 25% and always happy customers. Finally, we are actively progressing toward a U.S. listing with a target window at January or February of 2027. We will maintain our Oslo listing alongside the U.S. On structure, we intend to file as a U.S. domestic issuer rather than a foreign private issuer, reflecting an expected majority U.S. resident investor base. That means filing according to U.S. GAAP and adopting the full 10-K, 10-Q and 8-K reporting cadence. This will require more disclosure than the foreign private issuer path, but we believe it is the right structure for our investor base. To complete the dual listing, we expect onetime costs of USD 5 million all in, plus underwriting commissions on the IPO proceeds. To summarize, in the first quarter, we made significant progress on the commitments we laid out. We scaled service through acquisitions and partnerships, would cut costs meaningfully and we advance the Endurance platform that drives our margin expansion. Otovo is now a global AI-enabled home energy service platform with a clear path to scale and durable profitability, targeting a $37 million plus unit market with a significant service gap. Thank you for attending. We will now open for questions.

First question. Revenue fell 32% year-over-year is the core business shrinking. Jennifer, why don't you take that question?

Yes. That's a really good question. I would say that we're pivoting away from the low-margin new gold business, and we're really focusing on higher-margin service. Our core business is service. And quarter-over-quarter, we grew 10x from essentially 0 in the third quarter of last year. So that's where I would set this attention is on the service business.

So the core business is expanding rapidly, not shrinking.

Correct.

All right. And moving on to the next one. Can you walk us through the EnergyAid economics, okay? So we basically -- I'll take this one. We basically paid $18.7 million. You can see that on Slide 13. We've laid out all the costs or purchase price for each acquisition as we're supposed to. 11.5 million EV. And if you look at 50-50 roughly on stock and cash. I think it's important to take a look at your -- to mention in the previous slides, the $3 million in cost savings. We see that to be even potentially higher here with additional revenue on top. So if you were to take out and say the company was profitable, so it's about $3.5 million. When you look at $3.5 million on the $11.5 million, that's a pretty attractive multiple, say, leased. And if you had hit the target, which we expect to hit here in the coming weeks and months on a $5 million run rate for just that business alone. So that's 25% of a $20 million roughly top line rate. Now you're looking at about $5 million or near half of the purchase price already. So it's pretty compelling economics. Can you give some more detail on the Freedom Solar? What did you actually acquire for how much? Jennifer, you want to take this one?

Yes. Freedom was an acquisition of assets. And so it's the purchase of customer relationship price. Our relationship with Freedom gives us access to their customer portfolio and more gas on 417 commercial installations. And the way to think about this, this is really our entry and commercial solar O&M and purchase prices on the slide on just the reference, it's approximately $470,000.

Okay. Next one. On the credit facility bottleneck, the subscription SPD revolving credit facility matured in January 2026 with extension talks still ongoing, what is the bottleneck and finalizing this? And is this delay restricting your asset deployment and switch your line? Jennifer, do you want to take this, please?

Yes, absolutely. We've been in conversations with our banks. I think that's moving along nicely. It's a very immaterial amount, and the plan is just to settle that next year. As far as asset deployment in Switzerland, there hasn't been much in the last 12 months. So it's not really having any impact.

So it's kind of a nonevent.

It's a nonevent.

All right. Next question. On steady-state OpEx, stripping out the noncash USD 35 million, USD 3.5 million roughly to Cloud impairment, which is about USD 3.8 million. What is the clean steady-state quarterly OpEx run rate we should model for the rest of 2026 as your cost reduction measures fully phase in? Do you want to take this one as well?

Yes. No, absolutely. So for this very reason, we included an adjusted OpEx slide within the deck to help give you a flavor of what the current cost structure looks like and will look like on a recurring basis. Now that said, we are continuing to focus on cost rationalization. So I wouldn't expect that number to move over time, but in a downward trajectory. But I'm not going to -- we're not going to give additional guidance on that at this time. And additionally, there's a reconciliation in the appendix.

Okay. I think one note here is that as we get into the back end of the year and certainly moving into adjusted EBITDA, EBITDA, EBIT, net income, all relatively about the same number. There's not much. This is a very capital-light business. There's not much depreciation and amortization after we do these write-offs. And it approximates cash pretty closely is important. So any of those metrics you want to use, they're pretty close to cash. Okay. Okay. Next question. On field service margins, field services posted a negative gross profit of negative $1.3 million due to training and localized density issues. At what quarterly revenue run rate or scale, do you expect this segment to cross into positive gross margins. It already get the EnergyAid acquisition on April 1, already put us well into that, and we expect to continue to expand, in fact, the margin as we stated in the materials in the comments was about roughly about less than 20 points off, so about 20 points off our targeted gross margin of 40%. We expect to have as we get the training done and when we acquire companies, a lot of these technicians or all these technicians are trained up as part of this cost savings and our acquisition versus an organic hire. And if you look at that plus more and more density as more and more sales are climbing for a variety of reasons that we've laid out in the debt, then we expect that, that gross margin to be achieved sooner than we expected. And so we are there at this point in time as far as positive gross margin and contribution on the service business, and it will go much further out very quickly from here. Okay. Next question. On profitability time lines, your 2026 profitability targets rely on pending, nonbinding M&A like SunSystem Technology. What is the organic path to meeting your Q2 and Q3 profitable goals these transactions face delays? We are seeing a lot of organic growth. I would say that the likelihood of this transaction, in particular, closing is quite high in our opinion. Of course, it could definitely be delayed or not even happen. But I would expect that given the amount of our pipeline of M&A that something would take its place quite quickly. And in addition to the SST, we have that same pipeline, we do expect to be announcing deals in the not-too-distant future. Some of those to be review would be decently significant. So we have multiple ways to succeed. And if you look at the slide towards the end of the deck on the summary page, and I would point you to Slide 23, you can see here that there is quite a bit of areas or levers to pull to hit the profitability targets and the growth targets that we've laid out. The commercial business is ramping quite quickly off the back of Freedom, but also EnergyAid. We do expect some contribution of that with SST. Again, more and more of the benefit of EnergyAid's coming to the fore with additional OEM and asset ownership contracts spreading across our base, both in Europe and the U.S. Endurance is cutting out our costs way faster than we expected even 4 weeks ago. And so -- and then we're seeing a lot more acquisition opportunities to replace anything that may or may not fall out. So we feel quite confident we've got multiple ways to win. You would say that all these hit, does this mean that you could do better? I'll let you read in through it as you see fit. Does the 2026 revenue and EBITDA guidance reflect a H2 run rate or a year-end run rate? What is your expectation for year-end run rate? It is a 2026 run rate. So the exit of the year, so you can call it the second half versus focus on the exit would be considerably higher. So if you can do some back of the envelope math, you would say that sort of looks like USD 15 million on an exit, possibly more. That's about right. So it's an overall annual projection, not a second half run rate, which would be higher. Next question, how much of the projected revenue increase is due to M&A? How much is due to the OEM partnerships and how much is due to organic growth? In other words, what assumptions are you making to get there? After the closing of SST, any other acquisitions, especially ones of meaningful size would be in addition to this. So we are a few smaller ones that we're tuck-in, but it won't move the needle too much, except for give us more footprint with the big OEMs in contracts. So we largely have what we need as we just close and what is in front of us at this point in time. So anything in addition to that in the back part of this year would be an increase in guidance, both revenue, most likely in net income and adjusted EBITDA. Stock liquidity is very low. Are there any measures planning to improve this? Yes. It's not good at all. And we want to get it up. So we're going to be doing -- we have been doing a lot more IR work, sorry, Investor Relations work. We're going to continue to do that. We're in Oslo right now. I'd be happy to meet with anybody to talk about what we're doing here and really just can't candidly spread the word. We are getting more and more funds interested both in the U.S. and in Europe and to -- and if you look at the dual listing and the purpose of that is to drive more and more of pent-up demand for American investors to get invested in Otovo. So the last rate that we'll say this. We did have both retail U.S. high net worth and some hedge funds that we're not able to participate because the deal was closed so quickly. And so we do see a lot of kind of investor demand given the compelling opportunity that we believe management at least Otovo offers. So we are working on it very diligently, and you're going to see us more and more out there both in Europe and the U.S. and that's why we're committed to the dual listing and going down that path for the U.S. as well. All right. What is the confidence to reach the goals of profit in the year 2026? Pretty high. Look, I don't know what exactly week-to-week, there you can have the variability there. That's for sure. Does that spill over month-to-month? Yes, it does. However, we are seeing a tremendous amount of traction week-over-week in sales right now. And we're starting as we get the integration done much faster, things are gelling and quite frankly. And so we're seeing a good amount of M&A to see compelling valuations there. I see that we're going to be able to close way more deals than we thought that are very, very accretive frankly, at better pricing than we thought. Second, if you look at what we're doing with the Endurance that has gone way faster, way better than we thought. And we're going to be able to cut a lot more expenses, we think, this year versus our plan with the acquisitions and including the old Otovo for next year. So that is well ahead of plan. That's going to go directly to our bottom line. And then what I would say is on the commercial side with OEMs, with asset managers, we are getting a lot more interest in additional work, and we didn't expect that. And as we get a bigger footprint, that drives more of that work to us. How does that happen? Because a lot, if not all, of these manufacturers and the asset owners would really prefer that they have one big service provider that can cover across all multiple territories. Candidly, that does even include outside Europe and the U.S. We're not there yet. We're not going there necessarily anytime soon, but it does give you the benefit of understanding about why we have such a big footprint, why we have so many multiple ways to win and why we have confidence in the net income guidance for this year. And I will tell you that there is nothing more focus than mine and Jennifer's been hitting net income positive and making that real. And then from there, moving up. If you look at roughly say we have a few more acquisitions, we get $100 million run rate or higher on revenue, and we start moving towards our 25% net, that's generating about $25 million of earnings and cash flow a year. We do see that to be very realistic as we look forward in the next couple of quarters or so to be moving towards that kind of run rate. And so we feel confident that there's multiple ways to win. We intend to win. All right. Let's see if there's any other questions. All right. Well, seeing no more questions. Thank you for joining us. We look forward to talking with each of you. If you would like to have some more dialogue, please reach out to our website. And you will find me my e-mail all over and looking for service opportunities and better ways to improve our service for our customers in each and every country and each and every region. And if you want to have further dialogue on some of the financials that we can talk about and so forth, Jennifer would be happy to talk with you as well. We look forward to seeing you again soon, and thank you for tuning in.