Good morning, 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 three 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, tighten capital allocation, improve cash management, sharpen our execution, and make better use of technology, including AI, across Otovo's platform. Lower overhead by rationalizing less profitable operations. Third, invest in our Endurance system to create profitable operating leverage, expand EBIT margins, enable synergies in our M&A. We accomplished a lot in the first quarter. We acquired three customer portfolios in Europe, Solar Service Professionals, and EnergyAid in California. More recently, SunSystem Technology in the Northeast U.S., and established a relationship with Green Panel. We ramped up field 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 EUR 4 million in cost reductions, including EnergyAid synergies.
The full effect of which is expected in the second half of 2026. Where are we going from here? We'll do more accretive M&A, executing year one 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. 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'll provide monitoring, repair, and memberships for solar batteries and EV chargers. Across Europe and the U.S., there are roughly 37 million behind-the-meter power asset installations. We estimate over a third of these are orphaned 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 fail 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 seven 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-$90 million and adjusted EBITDA of approximately $2.5 million-$7.5 million. We have roughly 30,000 customers, including EnergyAid, around 20,000 memberships, and an accumulated legacy customer and monitoring base of 1.4 million. There are more than 37 million asset-owning homes and businesses across the United States and Europe, more than 13 million of which are orphaned customers with no service provider.
We estimate the annual Service Addressable Market at more than $55 billion across the two continents. Three dynamics define 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, leaving millions of homeowners with no one to call when their systems fail. Otovo bridges that gap by giving these systems a home for best-in-class service. Second, a fragmented market primed for consolidation. In the U.S. alone, there are an estimated 300 service-only companies and over 10,000 installers with some sort of service operation. Most are running expensive software stacks and serving only their local market. Depressed valuations create an ideal acquisition environment for us. Third, proving willingness to pay. Demand for Otovo memberships has grown tremendously in both the U.S. and Europe, especially in regions with aging systems.
Our business model generates up to five revenue streams per customer, with a target average revenue per customer of roughly $1,400 per year for residential at a gross margin of 45%. For a residential customer, those streams are in the Otovo Care membership, repairs and field service, equipment upgrades, retail power, and Virtual Power Plant or Grid Services. Commercial customers generate meaningfully higher revenue at about $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 establish long-term relationships, upgrades expand the asset base per account, and retail and grid services then 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 four areas: marketing, sales, operations, and supply chain. Industry EBIT margins sit around 10%-20% today. At scale, we are targeting a much stronger EBIT margin of 20%-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 four 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 book inspections 24/7, allowing customer response on weekends and after hours. We have a zero-touch sales path where customer inbounds go 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 email, SMS, and voice on the same customer record, geofence job sites, and technician mobile auto-tracking. In supply chain, we track inventory across warehouses and trucks, run three-way matched purchase orders with Ramp integration for one-click bill approval, and handle return authorizations 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 touchpoint. We have three growth channels. First and foremost is M&A, the roll-up of service companies and customer books. We acquire local service companies, taking vans, technicians, and customer contracts in one stroke, and we buy customer books from failed installers and other companies at cents on the dollar, then deploy Endurance after closing to cut software, dispatch, and call center costs, in addition to increasing operating efficiency.
Second are OEM and asset owner deals, multi-geography contracts that drive scale. We lock in OEM service partnerships across our footprint and sign multi-country deals with asset owners such as solar funds, utilities, and leasing platforms. Each new geography compounds the value of our existing OEM relationships. Third is 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 to Otovo Care memberships and provide upgrades and retail 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 three 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 cost.
The SSP acquisition was our entry into California, the largest residential solar market in the U.S. EnergyAid adds approximately $19 million in revenue, 30 vans, 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 five 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 three buckets: European customer books, U.S. service providers, and partnerships.
Starting with customer books, we acquired three 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 Otovo Care at a very attractive customer acquisition cost. In the U.S., we have built a coast-to-coast service footprint through four transactions. Freedom Power closed in the first quarter, brought us over 400 commercial systems and roughly 70 MW 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 U.S. 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 Onvis and SSP. Looking at costs by category, excluding non-recurring non-cash expenses, operating expenses were down EUR 2.2 million year-over-year. We reduced European payroll by EUR 2.3 million, which was partially offset by the addition of Onvis and SSP payroll in the United States. Marketing was reduced by EUR 2.4 million to EUR 900,000 as we reduced our reliance on performance marketing and shifted away from higher customer acquisition cost business segments. External services rose slightly, other operating expenses fell by EUR 700,000. We've adjusted OpEx to provide color around our recurring cash expenses.
Adjustments were made for non-cash balance sheet changes and non-recurring expenses such as severance, 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 EUR 15 million, following a EUR 16.6 million private placement completed in March. These proceeds are earmarked to fund 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 EUR 900,000, and our working capital tightened as we are freeing up liquidity 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 our organic growth in our existing markets. From here, we expect to double our number of customers to 60,000 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 three organizations, with the 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 for a large run rate savings, and replacing third-party voiceover IP in our in-house real-time and SIP stack. At SSP, we are collapsing sales, conversation intelligence, drip messaging, and SMS tools, 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 walked 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. Where we've moved from buying contact lists to buying service capacity, technicians and vans, 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+ commercial systems and around 70 MW under management for $0.85 million. 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've closed EnergyAid, the largest of these, a $ 11.5 million Enterprise Value transaction, adding roughly $ 19 million of revenue, 30 vans, and 29 technicians across California, Arizona, and Nevada. We've signed an LOI for SunSystem Technology, a 10 year+ O&M business operating in 14 states with around $ 14 million of revenue for $ 0.77 million in cash plus an earnout. SST is what gives us a genuine coast-to-coast footprint. That footprint is what makes us credible for larger OEM service partnerships. The Otovo GP relationship, our Pan-European field services partnership becomes operational in quarter two. Two things to take away. First, capital discipline. SSP and SST each bring revenue several times their 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. coasts 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 van and technician fleet to nearly 50 at the end of quarter one, and we expect SST to nearly double the size of our technician fleet. Let me summarize the quarter in three 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 subscriptions or memberships, we are executing a profitable shift towards service and 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 cuts. 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 catalysts, organic sales are accelerating. EnergyAid adds $19 million of annual revenue. Our commercial business is ramping. Endurance 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 and an active M&A pipeline.
For 2026, we are guiding revenue of $80 million-$90 million, adjusted EBITDA of $2.5 million-$7.5 million, and 60,000 customers. On the pipeline, we are in active definitive discussions with three companies representing more than $40 million of revenue potential and $10 million of EBITDA potential, with an additional short list of four 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 target 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 of 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 one-time costs of $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, we cut costs meaningfully, and we advanced 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+ 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, please?
Yeah, I think that's a really good question. I would say that we're pivoting away from the low-margin new build business, and we're really focusing on higher-margin service. Our core business is service, and quarter-over-quarter, we grew 10 x from essentially zero in the third quarter of last year. So that's where I would focus attention is on the service business.
The core business is expanding rapidly, not shrinking.
Correct.
All right. Moving on to the next one. Can you walk us through the EnergyAid economics? Okay. 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 and purchase price for each acquisition, as we're supposed to $11.5 million Enterprise Value . If you look at 50/50, roughly, on stock and cash. I think it's important to take a look at, if you were 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. If you were to take out and say the company was profitable, say it was about $ 3.5 million, when you look at $ 3.5 million on the $ 11.5, that's pretty attractive multiple, to say the least.
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. That's 25% of a $ 20 million, roughly, top line rate. You're looking at about $5 million or near half of the purchase price already. It's pretty compelling economics. "Can you give some more detail on the Freedom Solar? What did you actually acquire and for how much?" Jennifer, you want to take this one, please?
Yeah. Freedom was an acquisition of assets, and so it's the purchase of customer relationship rights. Our relationship with Freedom gives us access to their customer portfolio and warranties on 417 commercial installations. The way to think about this is really our entry into commercial solar O&M. Purchase price is on the slide that John just referenced. It's approximately $470,000.
Okay. Thank you. Next one. "On the credit facility bottleneck, the subscription SPV revolving credit facility matured in January 2026, with extension talks still ongoing. What is the bottleneck in finalizing this, and is this delay restricting your asset deployment in Switzerland?" Jennifer, you want to take this, please?
Yeah, absolutely. We've been in conversations with our banks. I think that's moving along nicely. It's a very immaterial amount. 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. It's not really having any impact.
It's kind of a non-event.
It is a non-event.
All right. Next question. On steady state OpEx, stripping out the non-cash $ 35 million, $3.5 million, roughly, U.S. Otovo Cloud impairment, this is about $3.8 million. What is the clean, steady state quarterly OpEx run rate we should model for the rest of 2026 as your cost reduction measures fully phase in? You want to take this one as well?
Absolutely. For this very reason, we included an adjusted OpEx slide within the deck to help give you a flavor of what the current cost structure looks like and will look like on a recurring basis. That said, we are continuing to focus on cost rationalization, I would expect that number to move over time, and a downward trajectory. We're not going to give additional guidance on that at this time. Additionally, there's a reconciliation in the appendix.
Okay. Thank you. I think one note here is that as we get into the back end of the year and certainly moving into 2027, adjusted EBITDA, EBIT, net income, all relatively about the same number. This is a very capital-light business. There's not much depreciation and amortization after we do these write-offs, and it approximates cash pretty closely, is important. Any of those metrics you want to use, they're pretty close to cash. Okay, next question. "On field service margins, field services posted a negative gross profit of -$ 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 did. The EnergyAid acquisition on April 1st already put us well into that, and we expect to continue to expand.
The margin, as we stated in the materials, in the comments, it was roughly about less than 20 points off, but still about 20 points off our targeted gross margin of 45%. 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. That's part of this cost savings in an acquisition versus an organic hire. 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 deck, we expect that gross margin to be achieved sooner than we expected. We are there at this point in time, as far as positive gross margin and contribution on the service business, it will go much further up very quickly from here.
Okay, next question. "On profitability timelines, your 2026 profitability targets rely on pending non-binding M&A, like SunSystem Technology. What is the organic path 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. I would expect that given the amount of our pipeline of M&A, that something would take its place quite quickly. 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 we view would be decently significant.
We have multiple ways to succeed, if you look at the slide towards the end of the deck on the summary page, 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 Power, also EnergyAid. We do expect some contribution of that with SST. More and more of the benefit of EnergyAid's coming to fore with additional OEM and asset ownership contracts are spreading across our base, both in Europe and the U.S. Endurance is cutting out our costs way faster than we expected, even four weeks ago. We're seeing a lot more acquisition opportunities to replace anything that may or may not fall out.
We feel quite confident we've got multiple ways to win. You would say that if 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 a year-end run rate? It is a 2026 run rate. The exit of the year, so you can call it the second half was this focus on the exit, would be considerably higher. If you can do some back of the envelope math, you would say that sort of looks like $15 million on an exit, possibly more. That's about right. 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. A few smaller ones that we're a tuck-in, but it won't move the needle too much, except for give us more footprint with the big OEMs in contracts. We largely have what we need as we just close and what is in front of us at this point in time. Anything in addition to that in the back part of this year would be an increase in guidance, both revenue, most likely in that income-adjusted EBITDA. "Stock liquidity is very low.
Are there any measures planned to improve this? Yes. It's not good at all. We want to get it up. 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 candidly spread the word. We are getting more and more funds interested both in the U.S. and in Europe. 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. The last raise, I will say this, we did have both retail U.S., high net worth, and some hedge funds that were not able to participate because the deal was closed so quickly.
We do see a lot of pent-up investor demand, given the compelling opportunity that we believe, management believes Otovo offers. 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 end of year 2026? Pretty high. Look, I don't know what exactly week to week. You can have the variability there, that's for sure. Does that spill over to 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, quite frankly.
We're seeing good amount of M&A. We see compelling valuations there. I see that we're going to be able to close way more deals than we thought that are very accretive, and frankly, at better pricing than we thought. Second, if you look at what we're doing with 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. That is well ahead of plan. That's going to go directly to our bottom line. 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.
As we get a bigger footprint, that drives more of that work to us. How does that happen? 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 an 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. I will tell you that there is nothing more focus of mine and Jennifer's than hitting a net income positive and making that real, and then from there, moving up.
If you were to look at roughly, say we have a few more acquisitions, we get a $100 million run rate or higher on revenue, and we start moving towards our 25% net, that's generating about $25 million of earnings in 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. We feel confident that there's multiple ways to win, and we intend to win. All right. Let's see if there's any other questions. All right. Well, thank you. Seeing no more questions. Thank you for joining us. 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 email all over.
I'm looking for service opportunities and better ways to improve our service for our customers in each and every country, in each and every region. If you want to have further dialogues on some of the financials as we can talk about and so forth, Jennifer would be happy to talk with you as well. Look forward to seeing you again soon, and thank you for tuning in.