Release Date: February 24, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Otovo ASA (OSL:OTOVO) achieved a record gross margin expansion, with a 6% year-over-year increase.
• The company successfully reduced operating expenses by 46%, primarily driven by payroll reductions.
• Otovo ASA (OSL:OTOVO) completed a strategic acquisition of an Austrian leasing portfolio, adding significant contracted subscription revenue.
• The company is experiencing strong growth in battery installations, with 65% of customers opting for battery additions.
• Otovo ASA (OSL:OTOVO) entered into a definitive agreement to sell its continental subscription assets, expected to free up around 155 million in cash.

Negative Points

• Total operating income decreased to 155 million year over year, reflecting a decline in installation activity.
• The subscription share of revenue decreased in Q4, indicating a potential challenge in maintaining this revenue stream.
• Working capital contraction had an adverse effect, tying up 24 million in cash.
• The company experienced a negative operational cash flow of 79 million.
• Otovo ASA (OSL:OTOVO) faces challenges in markets with disadvantageous macro environments, such as Scandinavia, France, and Spain.

Q & A Highlights

• Warning! GuruFocus has detected 7 Warning Signs with OSL:OTOVO.

Q: Can you provide more details on the financial results for Q4 2024? A: Andreas Setochem, CEO, explained that Otovo installed approximately 1,200 systems, generating over 160 million kroner in revenue, with a split of two-thirds from direct sales and one-third from contracted subscription revenues. Including the acquisition of an Austrian leasing portfolio, the total installations reached about 1,600, adding more than 60 million kroner to contracted subscription revenue. The gross margin expanded, marking another record quarter, and the company is optimistic about further margin expansion.

Q: What are the key growth markets for Otovo in 2025? A: Andreas Setochem, CEO, highlighted Portugal, Poland, and Italy as strong performers expected to continue their growth. There is also potential in German-speaking Europe, where Otovo aims to increase its market share. In Scandinavia, France, and Spain, macroeconomic factors could boost sales. The company is also focusing on battery sales as a growth vector, with lower costs and stronger capabilities driving consumer demand.

Q: How has Otovo managed to reduce costs significantly? A: Petters, CFO, stated that operating expenses reduced significantly due to a cost program, with costs decreasing from 180 million to 97 million kroner, a 46% reduction. Payroll was the primary driver of this decrease, and marketing expenses also declined. The company expects this trend to continue into the first quarter of 2025.

Q: Can you elaborate on the recent transaction with Swiss Life asset managers? A: Petters, CFO, explained that Otovo entered a definitive agreement to sell its portfolio of continental subscription customers to Swiss Life asset managers. The transaction includes a sale of vintages built between 2020 and 2024, valued at around $50 million, with a net cash effect of 13 million after debt repayment. Otovo will continue selling new subscription customers to Swiss Life, with expected volumes of around 55 million until Q3 2026.

Q: What strategic changes has Otovo implemented to adapt to the new market environment? A: Andreas Setochem, CEO, outlined that Otovo has reduced its number of offices from 13 to 8, co-located operations in Madrid, and cut approximately 200 positions. These changes have helped reduce costs and improve efficiency. The company is focusing on growing sales volumes and customer value without increasing employee numbers, aiming for profitability on a running basis.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.