Member Info for Andii

Lawrence, can you explain your understanding of the deferred revenue again please?

Pre-payments from insurers in 1H 26 was likely in the region of 50k leakbots so $3m. But pre-payments arent classed as revenue. They get recorded as a liability on the ballance sheet, and the total at the end of the accounting period is noted down as deferred revenue yes? Also, this income, effectively an interest free loan, does not count towards the ebitda loss.

This means the actual cash coming into the business in 1H 2025 was more like

£1.8m recurring revenue (existing leakbots of say 165k midway through the period would mean £11/per installed leakbot worldwide or £22/annulised)

£0.3m for one off sales (mainly Scandinavian)

A further £2.5m +/- for pre payments bringing the total cash inflow to the business to £4.6m. This means if they reclassified the pre-payment as a 1-off purchase, the Ebitda loss for the FY2026 would fall to almost zero.

This^^ along with the recent raise, increasing plumber density and the large stockpile of leakbots in inventory is IMO why the company can confidently say they have enough working capital and won't need to do any more raises.

I like the term "net flow" in the Dowgate note, it shows positive cashflow last year, (+£4m) slightly negative (-£1.8m) this year then (+£1m) next FY from April 2026. And all that whilst underestimating the current years installed leakbots by 20 or 30k leakbots!!

84% margin per device is probably calculated because the density will be say 2.5 visits per day by that point and each device will have much less call-outs each compared to year 1. The call-outs will be for one leak also and not multiple issues each visit they will experience in year 1

Https://mobidrive.com/sharelink/p/3rOAlTRnizcTnUp3YCawr2754fWhuN3RJKCMPfnn2UxZ

Https://ibb.co/6RHcXsmV

https://ibb.co/HDCcf7bj

https://ibb.co/WZTph8h

https://ibb.co/chyF2v5V

https://ibb.co/LXsQvQyS

Lawrence, if a device is worth $30 ($56 delivered including losses), wouldn't there be a case for having a local repair shop in each state? Old and returned leakbots could be posted back ($5), the customer could be given a $5 voucher, then ondo spend $5-10 refurbishing the leakbot, then they have a leakbot in the US on the shelf for $20. From there they only need $5 postage and a 80% rollout rate, thats a CAC of £20-25 and not £56

There would also be a small revenue for the subscription fee to have the device monitored from Ondo. The economics of Nordics aren't discussed anywhere else

Here is what the Dowgate capital research note out today mentions on Sweden/Nordics:

Nordic (Denmark & Sweden) orders see an upfront device fee (between £17 and £30) followed by a much lower monthly fee.

Nordic Model; one-off device payment on shipment, at good gross margin (can be up to 30%) but with less recurring revenue thereafter (just a small monthly data fee in Sweden).

The expectation was that while LeakBot gains traction in the US market, Nordic sales would generate substantial immediate revenue and cash to support the gross margin drag from the US rollout.

• The Swedish Insurance partner had indicated a major rollout in FY26 and FY27; covering 18 provinces with orders scaling rapidly from 3,000 units per month, in multiples of 3,000 devices per batch. At >£30 each, this would have generated significant one-off revenue, gross margin and cashflow in these years. However the Nordics have proven problematic (Sweden stalled and Denmark flat) while US demand has taken off and can go faster with additional funding. 1H26 Nordic sales fell 54% yoy to £0.5m while US sales jumped >600% to £1.1m.

• The issue in Sweden has been caused by a decision to market LeakBot as part of a smart app to engage the Insurance partner’s customers and to charge them for the IoT service. The app has struggled with development delays and reluctance of customers to pay, leading to slow regional rollout. This not a model seen elsewhere since it is primarily the insurer which benefits via claims savings.

• Future growth in the Nordics is expected to come from the new signing of Sampo's digital-only subsidiary IF P&C Insurance, which bought Topdanmark.

Research note from October

https://www.clearcapitalmarkets.co.uk/analysis/richmond-hill-broker-note

Regarding Ebitda loss, £3.3m 1H to £1.7m 2H.

Could it look something like this?

£1.7M Q1

£1.4M Q2

£1.1M Q3

£600k Q4

£0 Q1 next FY

+£700k Q2

Question 27:

Can you increase the life expectancy of a leakbot beyond 4 to 5 years? Maybe used units could be returned and serviced?

Answer from Meeting:Absolutely. So part of that is to do with the insurer churn as they cancel policies. Part of it is to do with what we call technical churn. If a device runs out of batteries and the customer doesn't replace it, that kind of thing, there are definitely opportunities that we'll announce fairly soon that will have a significant increase on that, on that lifetime as well

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There will come a day where customers will change insurance policies to a new insurer who supports leakbots so the retention rate will improve.

Last point, from the FY results video, they talk about switching existing UK and Nordics customers to the new $5/6 per month subscription so the recurring revenue from those geographies could grow faster than we expect short term without large numbers of new devices being installed.

Q67 states year 2 margins of 50-60% or higher. Surely that is a snapshot of the current gross margin based on average 1.4 customer visits per day. If they get to 1.7 customers per day, year 1 and year 2 COGS margins improve significantly.

When I talked about 100k new devices, and mentioned 40k devices, what inwas getting at is they could utilise 50k of the devices they have in inventory to supliment the 100k new devices installed. If they get to an 80% installation rate, that would mean they could send out 50k devices from stock at only the cost of postage, 40k would arrive meaning an extra 72k devices require manufacturing (60k of which actually get installed) in this way the average CAC would fall significantly below $54/leakbot for the next 100k of new devices registered.

How do I know they have (had) 50k devices on the shelf?

Question 17:

Kevin, Inventories had built to £1,029,000 at 30th Sep 2025. Where are we now and what do the Company believe to be the right level of Inventory to be held on average in future?

As at the end of November 2025 the inventories have reduced and this is expected to continue as we approach the March year end. Our view is the optimum level of inventory for the business at this time is nearer 25k (circa £0.5m) but it will be dependent on the deployment order books

Last Q, how do I know they are moving away from auto ship? It was discussed FY results video at 29:30, with auto-ship specifically mentioned at 32:10. Basically Craig talks about being given a spreadsheet and sending out to all addresses, but rhet are playing with branding, advertising, and 3rd party data on which customers to remove to improve install rates. That video is from august and the install rate April to September was 70% so i'm betting that they had a lower than 70% average installed rate April to june and a higher average rate above 70% July to September. Could they now be at 80%? I think so, especially with nationwide being such a big influence and them rolling out to smart home customers who are already receptive of IoT tech and ting sensors etc

Rollout rate was also discussed in the interm results but I haven't listened again to pinpoint where. But I did ask 2 questions about rollout and device lifespan and received answers to bith;

Question 26:

Could you implement a recorded delivery system then ask for a device to be returned if it is not installed? Surely you have the mac address of each leakbot, can you blacklist leakbots that have been sold on the black market?

Answer from Meeting:As we have stated, the cost of manufacturing and distributing a LeakBot which is then not activated, and for which we therefore cannot recognise ongoing revenues, is a real cost to the company and impacts our year 1 gross margin. We are therefore constantly seeking the seeking initiatives to minimise the number of devices that are not activated, and also the most cost effective ways to recover these non-activated devices

I heard that the dividends will not be cash back, but will be new shares in europa worth more than the current marula shares, and keeping the existing marula shares which will obviously fall in value but if sold would be like receiving a dividend :)

So they liked 30p, but liked 25p even more, what will they be thinking about 21p?

https://youtu.be/IiDRconiYR8?si=NkQH4KHqRrBrTaBP

I like the slide from last years HY results at 31:30. The Master Service Agreement states that an insurer pays $600k upfront for 10k leakbots, and after 4 months those will be 100% deployed and another 10k order will be placed. Didn't Ondo announce £1.5m cash hitting the bank early october? Could this be 3x insurers placing a 10k order each? Could explain why they needed to do the placing if they need to employ more plumbers in a hurry as there were only around 50k leakbots installed in the USA until recently

Lawrence, writing off high margin Nordics customers is IMO missing a trick as they accounted for around 17k new leakbots in FY 2025 and with each leakbot installed proving itself over time, the Nordics orders you would assume would continue to grow. We also just had a Danish insurer buying over 3% of ondo at 30p. As we have 50k leakbots sitting on the shelf, we could easily post them to the Nordics for some very high margin revenue to nurse the remainder of this years cash pile. (At $50 per leakbot, Ondo could sell all 50k devices for $2.5m should a huge Nordic order come in). Lets say Ondo don't sell any more leakbots in the Nordics over the next 12 months, and say they roll out 100k new devices in the USA. If 40k of those devices actually make it into households (80% customer deployment) - this means the effective USA CAC reduce by 40% so $32.4 down from $54

Nowhere can I find the company stating as you said **"They say 50% gross margin in year two"**

I found this on page 10 of the FY results presentation "Year 2+ device margins naturally improve to +60% without any repair cost efficiency gains

With expected operational improvements (job frequency, jobs per day, average job cost), Y2+ margins quickly recover to ~80% and Y1 device margin in the US will stabilise to break-even"

I wonder if you can adjust your figures in your post from 16:00 yesterday to reflect;

1) The gross margin in year 1 should be better than 50% now due to falling repair costs over time (25 states were covered in march 2025 vs 26 states december 2025 which means that with every extra order from insurers, the density per state and the average visits per day will increase. A 55% gross margin would surely be realistic for 2H 2026 (current period)

2) You have used the same CAC and same gross margin for year 2. A 70 to 80% gross margin in year 2 should surely be more achievable due to year 2 requiring half the visits of year 1 so $15/device COGS year 2 vs $30/device in year 1

3) You have assumed 70% roll out, 80% or 85% would be more realistic due the company moving away from "auto ship"

4) Ondo raised £2.3m capital, some of which will be used to employ more plumbers. This could potentially mean $1m spend on plumbers which would mean enough plumber resources to cover the COGS for 33k leakbots. (1m / $30 per leakbot) If Ondo add 99k extra leakbots in the next 12 months, that means 33k of them will have pre-paid plumber support which could increase the gross margin from 50% to 75% in year 1

Can you agree on all of the above? There are loads of areas for improvement and using the historical figures for april to september as a basis for future margins and profit/loss is IMO not correct.

Https://wp-ondo-2021.s3.eu-west-2.amazonaws.com/media/2025/07/VFFF-FY25-Results-ONDO.pdf

Page 10

Average Device Fee Per Unit Sold in 2025 FY results was £14.1 down from £29.06 the year before.

If they can increase the number of high margin devices sold in Sweeden and reduce the number of devices lost in the post, this number surely improves?

Page 20

We continue to test and learn with “Autoship" as a way to enable much faster

deployments on mass market basis

^^I think this is the flaw causing too many devices to go missing in the post. They need insurers to post the devices as part of a policy renewal with the offer of a reduction in the cost of the insurance premium if the device is fitted.

That and they need users to change the batteries when they go flat. It would surely be cost effective to mail out new batteries once the device battery fell to 10%? Or if the battery is going flat, surely they could put the leakbot into an energy saving mode with less frequent connections/data uploads to the wi-fi?

*reduction in COGS (maybe $25/device down from $30)

Lawrence, your worked example at 16:00 is almost impossible to follow

The last results were a snapshot in time whereby there was a huge high margin order missed for Sweeden which could easily be addressed in H2

You also state that only 70% of devices are being delivered, that is a legacy figure based on just sending out devices en mass. They are only on their second year of roll-out in the US after all. Ondo have a number of plans to improve this figure significantly. If they can increase the rollout from 70% to 84%, what happens? The cost per device shipped CAC falls by 20% (from $54 to $43 per installed device), the ongoing revenue increases by 20% ($504k a year up from $420k), and the plumber density increases by 20%. As the plumber density will increase around 20%, they can go from an average jobs per day of 1.4 to 1.7. This will mean labour costs remain the same, fuel costs will come down (less travel time per day), material costs will go up but the nett gain per device will be a reduction in CAC (maybe $25/ device). This is for year 1. In year 2 the number of call outs per device is half that of year 2 so I feel your figures require some adjustments

Lawrence, what you state is in contradiction to the answers received from the company;

Question 67:

Please can you go through the anticipated Year 2 post-installation and subsequent years economics (gross margin).

On the US standard $60 per year. In Year 1 the costs are the device (plus postage) and a higher % of repairs than later years and therefore the margin is negative in year 1 . In Year 2 and subsequent years the margin increases to 50% or more due to no device and a lower frequency of repairs roughly half of year 1 so year 2 and subsequent year margins are 50 -70%.

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COGS reduces because;

1) Less devices will be lost in the post

2) Devices in their second year require 50% of the repairs compared to year 1

3) Ondo are currently targeting over 2 visits per day average in the USA up from 1.4 visits current average. They are spending money from the 25p raise to increase the number of plumbers to cover the expected rise in customer density. And higher density = higher margins

See questions Q26, Q27, Q39 from the investor meets company website

Have a look at page 10 of the investor presentation;

https://wp-ondo-2021.s3.eu-west-2.amazonaws.com/media/2025/12/IMC-PDF-VF-Ondo-Interims-Sep-30-2025.pdf

The company spent £500k on stock build - they have around 50k of leakbots sitting on the shelf...

The company spent £1.3m on loan note repayments - this could be restructured meaning no loan repayments until summer 2027 or even 2028

Trading receipts - £2.5m, but the actual revenue was only £2.1m

Expected FY revenue is between £4.5m and £5m - does this suggest that trading receipts are higher than revenue received suggesting there is money due to Ondo from insurers?

Ondo are still due £800k from outstanding 20p warrants

From the interim results:

• Revenues in the current year will be in the range of £4.5 to £5.0 million and that EBITDA loss will

be approximately £5.0 to £5.5 million.

• EBITDA loss of £3.3 million (H1 25: £2.0 million)

• The Group ended the period with cash of £0.6 million.

So by end of FY, EBITDA loss is forecast in the range of £5-5.5m. loss 1H was £3.3m so Ondo expect a £1.7m to £2.2m Ebitda loss of between october 25 to march 2026.

Bearish factors -

Ondo only had £600k cash end of september

Admin costs remain high but are forecast to only grow at 6%,

see statement from the full year report:

https://wp-ondo-2021.s3.eu-west-2.amazonaws.com/media/2025/07/Ondo_Draft_Accounts_FY_2025_29072025_-V12final.docx.pdf

• Sales and gross margin – for LeakBot this is based on forecasts incorporating a compound annual growth rate of 54% revenue; and 143% of gross profit over the next five years.

• Administrative expenses incorporating a compound annual growth rate of 6% over the next 5 years.

Full year results - tax loss

Page 61 - Tax losses available for carry forward against future profits = £1.488m (The Group’s unutilised tax losses carried forward at 31 March 2025 amounted to £13,787,695 (2024 - £8,951,000). A deferred tax asset has not been recognised due to uncertainty over the timing of the utilisation of the losses.

SO in conclusion;

Ebitda loss is coming down

Gross margin is improving (density is improving in the USA and uptake is improving above 70%)

Q 39: we would expect to get above the key average of 2 visit per day for each plumber as deployment density continues to improve across the various states we operate in (current average is 1.4)

Q 26: We are therefore constantly seeking the seeking initiatives to minimise the number of devices that are not activated, and also the most cost effective ways to recover these non-activated devices

Q 27: If a device runs out of batteries and the customer doesn't replace it, that kind of thing, there are definitely opportunities that we'll announce fairly soon that will have a significant increase on that, on that lifetime as well

Ondo just raised £2.38m and this is not for working capital

Question 67:

Please can you go through the anticipated Year 2 post-installation and subsequent years economics (gross margin).

On the US standard $60 per year. In Year 1 the costs are the device (plus postage) and a higher % of repairs than later years and therefore the margin is negative in year 1 . In Year 2 and subsequent years the margin increases to 50% or more due to no device and a lower frequency of repairs roughly half of year 1 so year 2 and subsequent year margins are 50 -70%.

Question 68:

Looking at the Swedish market there seem to be quite a few users being disappointed with the amount of false alarms. This is something that's now in the insurance companys problem now. Have you considered changing business model to having own plumbers in Sweden? This would shift the incentives and could significantly improve adoption rate.

LF have a level of exclusivity in Sweden and this is the only country where we do not do the plumbing repair , we would consider running the plumbing network for them if they asked for it but we would need volume commitments and repricing to make this worthwhile

Question 69:

Why is UK not more onboard ?

Leakbot is more suitable to HNW and particular segments within the UK market due to the lower average underwriting cost of escape of water claims compared to the USA and therefore we are targeting these carriers. As explained previous, the average policy premium for homeowners insurance in the USA is $1400. In the UK some mass market home insurers have policy premiums as low as £200 so the unit economics of the market are very different in the UK.

Question 70:

What about Canada ?

Answer from Meeting:What about Canada? That's a good question. That's literally just come in. Do you want to talk about that? It's of America. Yeah, I mean, it's a, it's an obvious question. So there are some big insurers in Canada and controversially our American General Manager likes to point out that Canada is very similar to the United States, although since Trump tried to annex it, I think that's become quite a controversial thing to say, but yeah, Canada is a good opportunity. But yeah, I'd probably just add to that, obviously Canada is a Commonwealth country, so going America to Canada is. A little bit tricky at the moment in terms of the tariffs, but going UK to UK to Canada is fine and we, and it's obviously something we have looked at