Otovo Q1 2024: Record margin and sales growth; added cost cuts in difficult market
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(1) Sold units 1,704, up 4% sequentially and down 13% year over year (1,962)
• Sold units grew from the fourth quarter in a very challenging solar market for Scandinavia and Iberia.
• Italy, France and Austria with the most favourable outlook in the next few quarters. Expecting moderate continued growth in sold units expected in next quarter.
(2) All-time-high margins
• Gross margin expanded to 21% and gross margin generated to 28% demonstrating pricing power of platform
(3) Cost program on track
• Headcount reductions are on track and revised upward.
• Cost improvements are on track for Q3 target and will reach the 80-100 million in savings in Q3 2024 relative to Q3 2023 on same volumes.
(4) Portfolio sale on track
• After successful sale of Scandinavian assets, now moving on to Continental euro portfolio.
• Process initiated and expected to take 1-2 quarters from start. Recent transactions in Europe demonstrate transactability and attractiveness of the leasing and subscriptions category.
A downturn in key Otovo residential solar markets in the aftermath of the energy crisis affected sales in the fourth quarter, resulting in fewer installations in Q1 than the year before. Installations were level with the sales in the preceding quarter, at 1,624 installations (2,832).
Total operating income was NOK 167 million (286 million), while the operating profit was negative NOK 108 million (-97 million). EBITDA was negative NOK 92 million (-78 million) in the quarter.
The company ended the first quarter with NOK 434 million on hand, in addition to the latent liquidity in the euro subscription portfolio.
A difficult residential solar market
Having navigated a difficult time, Otovo is starting to look ahead. 2024 is developing towards a return to the normal growth rates during the year, driven by improved technology, lower costs and electrification of homes;; subject to improving consumer economics. Variance will remain accentuated between regions and markets, but overall Otovo believes in a stronger end to 2024 than to 2023.
CEO Andreas Thorsheim remarks:
– The last quarters have been challenging, but the Otovo business model has held up, expanding margins and holding steady on revenue per customer. Solar technologies keep getting better and cheaper making me more confident than ever that all roofs will be covered by solar panels.
Added hardware
Otovo is increasingly a multi-hardware company, offering solar, battery storage, electric vehicle chargers and heat pumps. In the past quarter battery attachment rates took another big hike, surpassing 40% for the first time. Electric vehicle chargers were added to the sales menu in seven countries, and the heat pump initiative reached double digit attachment rates in March in Italy.
– The development in battery attachment rates is phenomenal. I believe we will see 100 percent of solar installations include batteries in the matter of 2-3 years, says Thorsheim.
Cost program on track
The cost program that was communicated in the last report is on track and will be expanded in terms of personnel efficiency gains. Headcount is down 62 from the baseline and is certain to go beyond the 65 FTE reduction target set for Q3, likely coming in above 90 staff lower than the year before. SG&A cost are developing as planned. As a consequence, the program is expected to reach its NOK 80-100 million savings range in Q3 2024 relative to Q3 2023 on same volumes, excluding marketing and depreciation.
The full compounding effect on efficiency gains from increased automation; use of artificial intelligence in customer and project handling; more digital tools; and pooling of teams in Madrid and staff reductions will be more visible as volumes grow.
– We remain vigilant on cost and hirings while building a robust company with the right cost structure and people in the right place. We want to have a low, flexible cost base while having the opportunity to grow in markets that are attractive, says Thorsheim.
Portfolio sale on track
The process of selling the euro denominated portfolio is underway. Given similar recent transactions in Europe on similar portfolios we are looking forward to a good process. Once completed the sale will free up capital tied up in the portfolio and gains representing multiple quarters of operating costs at current activity levels.
– Combining with our expectation of a pick up in volumes, tight cost discipline and the cash buffers on hand and latent in the portofolio, Otovo is well positioned for its path to profitability, comments Thorsheim.
Please find attached the quarterly report and the quarterly presentation that Andreas Thorsheim (CEO) and Petter Ulset (CFO), will provide at the webcast at 09:00 2 May, that can be obtained through the following link: Otovo - Q1 2024 presentation - Demio
Disclosure Regulation
This information is subject to the disclosure requirements pursuant to section 5-12 of the Norwegian Securities Trading Act.
Metrics used in this notice are defined in the attached financial report.
About Otovo: For homeowners, Otovo is the easiest way to get solar panels on the roof, and batteries in the home. Otovo is a marketplace that organizes hundreds of local, high quality and qualified energy installers. The company uses its proprietary technology to analyze the potential of any home and finds the best price and installer for customers based on an automatic bidding process between available installers.
Follow us on investor.otovo.com for reports, financial calendar, contact details and more.
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