Release Date: October 24, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Otovo ASA (FRA:89K, Financial) signed a term sheet for the sale of its Continental European leasing/subscription assets, which is expected to improve cash flow dynamics and result in a one-time gain in Q1 2025.
- The company is on track with its cost reduction program, aiming to reduce staff by 170 people and cut costs by more than NOK200 million annually.
- Otovo ASA is reorienting its customer acquisition efforts towards partnerships and more disciplined marketing, which is expected to increase sales volumes.
- The company achieved a battery attachment rate of 55% for the first time, indicating strong consumer interest in additional energy solutions.
- Otovo ASA's gross margin improved to 28%, with potential for further expansion through increased ticket sizes and added hardware sales.
Negative Points
- Total operating income decreased both quarter-over-quarter and year-over-year due to lower installation activity.
- The company faced restructuring costs of NOK32 million and legal fees of NOK6 million, impacting its financial performance.
- Sales were weak in the third quarter, affected by layoffs and organizational restructuring.
- The subscription share of sales dropped to 25% this quarter, indicating challenges in maintaining leasing sales.
- The closure of UK, Belgian, and Dutch offices may impact sales numbers in the short term.
Q & A Highlights
Q: Can you say anything about what type of player the buyer of the portfolio is?
A: The buyer is a highly reputable entity, knowledgeable about the space we're operating in, and has the capacity to hold these assets on their balance sheet. - Petter Ulset, CFO
Q: You seem upbeat about ticket size. Where do you see ticket size going in the next quarters?
A: The main drivers are adding more batteries and devices. We expect the ticket size to develop to NOK130,000 plus, supported by priority and opportunity markets. - Andreas Thorsheim, CEO
Q: Can you talk a bit about the warrants and why they are included in this transaction?
A: The warrants help align interests. The buyer sees upside in Otovo, and we retain ownership in the portfolio, benefiting from value creation. The warrants have an exercise price, contributing cash to the balance sheet if exercised. - Andreas Thorsheim, CEO & Petter Ulset, CFO
Q: How do you expect the closing of the UK, Belgian, and Dutch offices to impact your sales numbers in Q4 and Q1?
A: We focus on allocating resources where growth is inexpensive. The main goal is to acquire valuable customers as cheaply as possible, so the impact of closing these offices is minimal in the medium term. - Andreas Thorsheim, CEO
Q: Your sold leasing share dropped to 25% this quarter. What happened?
A: Sales were weak this quarter, partly due to restructuring. Our focus now is on increasing sales volume, battery and hardware attachment rates, and leasing share. - Andreas Thorsheim, CEO
Q: How does the portfolio sale compare with your alternative performance metrics (APMs)?
A: The transaction's discounted revenues align well with our reported contracted subscription revenues, making Otovo's business easier to understand post-transaction. - Petter Ulset, CFO
Q: How long is your runway now before you need to raise capital again?
A: With cost cuts and forward flow effects, we need to achieve 400-500 additional leasing sales to close the gap. We are optimistic about closing the profitability gap in 2025. - Petter Ulset, CFO
Q: Could you please give us some color on how the new leasing structure could impact Otovo as a potential takeover candidate?
A: The cost cuts are on track, the term sheet proves the value of the subscription portfolio, and sales is our key focus now. These factors make Otovo an attractive takeover candidate. - Petter Ulset, CFO
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
