Member Info for LawrenceHut

I think what's limiting the share price is the change in unit economics. I, and I suppose many others, don't see how they can reach positive FCF without further dilution. Unless the parent company lends them money of course.

Craig bought 40K shares in the placement, that's £10K. His annual salary must be around £300K IIRC (including options, bonus, pension).

It would have looked very bad if he hadn't contributed.

I don't think this is meaningful information, one way or another.

I agree, but it's a fine line. $1 more per month would greatly improve margins and the cash flow profile, but insurers have to accept it.

I don't know how reliable websites like chromestats and appbrain are, but I don't see an acceleration in the download rate of the Leakbot app.

Google Play still shows it at 50K+. I expect fewer than 50% of downloads are on Android (it was 86K in December, when Ondo passed the 200K installed devices, and the Google/Apple ratio should decrease as US share increases).

The day it switches to 100K+ in Google Play will be an interesting data point.

Hey Andii, I modeled cash flow assuming increasingly big orders, but I need a gross margin rapidly above 60% not to have negative cash flow at some point. This should be the case in the future, but Ondo is far from it. Considering the admin costs + finance costs, I don't see how Ondo can do without raising more cash. Hopefully the mother company or group can provide non-dilutive capital if Ondo grows fast. I'm not sure how to give a value to that.

I think a lot of people are thinking the same, looking at the share price. I hesitated shorting it above 20; I should have, but hindsight is 100%.

I''m not a professional investor—just trying to grow my capital and have some sort of retirement one day. I might be wrong. Hopefully. Everybody wins if Ondo makes it work: insurers, clients, water utilities, everybody, really.

I'll keep an eye on it, ready to jump back on the ship if appropriate.

I'll be away for a few days, I'll be back next week. We'll try to think about it between the pig in blankets and pudding.

Merry Christmas to all :)

"Ondo installed around 35k devices in the first half of the year so surely the monthly reduction in deferred revenue would be 5x more than your $35k per 7k devices, so $1.05m?"

Yes, plus all those who were installed in H2'25, and presumably some from H1'25.

Assuming these 35K were $5 contracts and ignoring churn, then all of them are creating $5 per month of revenue from now on, so 35K x 5 = 175K, or $1.05m for H2. This will bring down deferred revenue (a liability inside trade payable) by $1.05m, but again, that also means that $1.05m of the revenue that is recorded in the income statement will not bring cash.

But Ondo will sign new contracts bringing in cash. That's why Ondo needs to grow fast: new contracts must bring more cash in because a large amount of current revenue does not result in cash flow. The main source of cash right now is new contracts, not actual revenue. Once more devices enter into Y2 (10 months, really) or Y3, then recurring revenue will be a more and more important source of cash.

But although each new contracts for 10K shipments bring $600K immediately, it also causes a cash outflow of 378K (for device shipment), so cash inflow is "only" 222K. And you obviously also need to build up the plumbing network. But cash outflow is spread out (because it takes months to deploy the leakbots), so cash stays a bit longer; so immediate cash flow is $378K, and then ~222K of it is consumed over a few months, and every month the COGS is consumed (plumbing network).

"Pre-payments then could be somewhere north of $1m, certainly much higher than £100k"

you mean all prepayment during H1? Sure it should be quite high, I think. It just happens that they had about the same quantity of prepayment as they had "consumption" of deferred revenue (a tiny bit more). At some point, each "lot" of client matures, deferred revenue for this lot is zero, and revenue starts actually bringing cash again.

"Would it not be possible here that during the half year the deferred revenue could have dropped to £500k then climbed back up again to £2,839 based on new orders for £2.339m worth of new leakbots (~$3m - 50k devices) "

Yes, it drops as revenue is registered, and goes up as contracts are signed.

When it goes up in a given day (a contract is signed), cash comes in, revenue is not booked.

When it drops (Ondo gives the service): revenue is booked, but cash does not come in (as long as there is deferred revenue associated with this batch).

That's why it's the change that is important.

Let me use an example for illustrative purposes.

Imagine Deferred revenue is £3m at the beginning of the year and Ondo gives £3m of service throughout the year, but signs zero contract. Then Deferred revenue is now £0m, revenue is £3m, but no cash came in; it was all "consumption" of deferred revenue.

So cash flow is revenue + change in deferred revenue, that is, 3m + (-3m) = £0. That works.

Say on 31 December Ondo actually signs a contract for £6m. £6m cash comes in. Deferred revenue is now £6m

Cash flow is now 3m (revenue) + (6m-3m) (change in deferred revenue) = £6m. That works.

Aaan another mistake, sorry: it should read 495K , not 595K, obviously (600K – 105K)

Andii, yes, a bit more than 2.5 jobs per visit. Not impossible, but not sure they can reach that so quickly across the US. Something to keep an eye on.

Deferred revenue is pre-paid revenue, revenue paid in advance by Ondo's customers (insurers) but not yet delivered by Ondo.

So yes, typically an client pays 600K, 7K devices are installed, say all of them on Jan 1st. At the end of the year (March 31), 3 months are recognized as revenue (7K x 3 x 5 = 105K), and the rest remains as deferred revenue (595K), Every month, 35K revenue is recorded, and Deferred revenue goes down by the same amount, until exhausted.

Indeed, only revenue impacts EBITDA. EBITDA is not a cash item.

£1.8m recurring revenue - yes

£0.3m for one off sales - yes

A further £2.5m +/- for pre payments - no, you have to see the change in Deferred revenue, because there was Deferred revenue at the end of the last period, for which cash had been received but service was given in H1. So here, £2,839K – £2,740K = £99K.

Don't forget costs as well! CAC is $54 per device in the US, not sure how much elsewhere, so you, and COGS is mostly cash out (you can correct with other trade payables). So COS was £2.442m, and other change in other trade payable is basically £68. But you need to bring back D&A, which is non-cash as well (£206K).

And don't forget interest payments, and admin expense, which is the big money pit.

The standard way of doing this is to start from net income and bring back share-based payments, D&A, net finance expense, and changes in working capital. This is all in p13 of the Dec3 report (interim results). Cash flow from operations was a negative £4m in H1.

The positive cash flow from operations in FY2027 relies on a massive change in working capital of £8.3m. They are also planning for change in working capital to be £1.1m this year vs FY2025, which should be achievable if inventory goes down to £500m or so.

Then 2026 must end with the same inventory and the rest (mainly deferred revenue) higher by about £9.0m (not much room for the rest, I think – although maybe they can negociate payments with the Leakbot supplier and whoever supplies shipment

So they need to go from £3m in deferred revenue to about £12m (change of £9m), corresponding to basically contracts for 266K shipments, corresponding to 186K devices (but some will be partially paid, so it should be more). They are seeing 300K installs in FY 2028, so maybe...

"Net flow" is the cash flow from operations + cash flow from investments + cash flow from financing. This is the table in p13 of the Dec3 report. It was positive in FY2025 because of the capital raise. Interestingly Dow Capital does not have the same numbers as the audited report shows (financing items wrong by £0.4m, trading cash flow absurd...).

Amazing, thanks.

Wait, only ~20K total net additions in H2'26?! ~13K had already been delivered by end of Nov.

£8.3m from WC in 2027. They are planning for 200K shipped devices in H1'28, so presumably most of it is already contracted and paid for in H2'27, so 200K x 60 = $12m or £9.0m.

OK, so they need to accelerate very quickly, or they are bust. It's possible.

A margin of 84% is optimistic. That's approaching 3 jobs per day.

Also putting a lot of non-recurring revenue in there. And their 2029 figures relies on improvements on margins and/or CAC.

Interesting. I don't buy it yet, but we'll see.

Thanks, this is great. Hopefully it grows as much as they say. Ambitious but not absurd.

So they don't see a positive EBITDA until 2029.

They see a huge positive cash flow from WC in 2027. I don't see it; I wish they had given more details on it. This is the crux. Convince me they are correct, and I'll be back on the Ondo train. But I just don't see it.

Yeah, maybe recycling them this way would be worth it; I'm not sure of shipping costs in the US, and handling might not be that cheap. Inspection + repacking. Maybe if packages weren't open.

I think it's just more reasonable to expect that once Leakbot is more widespread, word of mouth will do its job and more clients will ask for it, and Ondo can stop autoship.

Andii: you have access to Dowgate capital's reports

Interesting, thanks.m>£30 each, if they cost £20, + shipping, it's not that much, only a few pounds per device. Do they estimate how much gross profit it would bring? To be 30%, it'd need to be much higher than £30. I guess shipping will be less than for the US, but it can't be that much less. US total cost is £28.4; if it costs the same, sale price should be £40.57.

The small monthly data fee could be very high margin though, it could be significant.

Re: EBITDA, it could, but note that EBITDA can be moved by various things:

CAC: more registration = more money spent on CAC = lower gross margin = lower EBITDA.

Of course, we want CAC to stay high = we want customer numbers to stay high.

Over a semester, any new device kills the gross margin; we can't rely on that to lower EBITDA semester to semester. EBITDA would improve if registration rate goes down, but we don't want that.

Underlying gross margin: should increase as the customers enter into year 2. Most US customers were still in year 1 at the end of H1, so I don't think this will have impacted things by that much. We are now at ~50K US customers on new contracts, or $3M in rev. Every 10 percentage points in gross margin improvement is $300K in annualized recurring gross profit (all other things considered). It's a bit ambitious but not absurd to think that we'll get at least that over the next year, for example going from 43% in year one to 53% in year two. But not by March. Some of it (from H2 last year), but not those devices installed this year.

Devices from last semester running a full semester. Most of the 36K devices installed in H1 only gave revenue (and gross profit) for only part of the semester. Say 3 months on average (probably a bit less): if they were all US, they would have given 540m in revenue and say 270K in gross profit. We'll get double that in H2, because they will run for 6 months instead of 3 on average (assuming no churn).

Admin expenses. Admin expenses going down would obviously greatly help EBITDA losses going down. Look at the details of admin expenses, I don't see them go down that much, but we'll see. Annualized Admin expense is £6.2m, D&A is £412K, so gross profit must be ~£5.8m to stop EBITDA loss. At a margin of 50%, revenue needs to be £11.6m—currently £4.2m annualized. 60% margin means we'd need ~$9.67 in revenue. And then you still need to compensate CAC for new devices. Admin expense going down would greatly help for sure.

To go from £4.2 to £11.6m, we need the equivalent to 123.3K extra US customers. At the current rate, it will take a bit more than a year. That would bring EBITDA to positive (ignoring CAC). But cash flow is essentially zero the first year, so that doesn't mean there will be enough cash to cover cash needs; cash really becomes positive at some point in Y2, depending on gross margin.

Yes, it's a snapshot, and yes, overall underlying (ex-CAC) gross margin should increase, ultimately. Broadly, expanding into new states brings it down, but overall it should go up. I would be carefully being too optimistic about speed of increase. So far, management has overpromised rather than underpromised, so I've learnt to be wary. Once beaten...

re: 100/40K. OK, but it's paid for already; I think it's more accurate to leave gross margin as it is but consider any extra inventory (above £500K) as cash, essentially. CAC is an accounting item, not a cash item.

Well-spotted for the 50K devices! Interesting to see the cost of the device ($26.6) vs the overall cost per device sent ($37.8).

re: autoship. I don't interpret what they said in the FY call as you do. They say they are experimenting and mention this. After the last call, it seems to me that they opted for autoship as a standard, basically paying a bit more to accelerate deployment. Increasing the registration rate would clearly be beneficial. But so far, it seems to me that it would slow down deployment. Maybe, as Leakbot becomes more well-known, adoption will spontaneously increase and customers will register for the program, which should greatly increase the registration rate. I'm curious to know whether they are already seeing this in Indiana; neighbors, families, friends, colleagues, etc. recommending Leakbot to each other.

It would be hard to recover Leakbots at a price worth it. If the device itself costs $26.6, that's the maximum value they can get back, minus shipping and handling costs.

As for churn, maybe they can reduce it if insurers offer a rebate, on the condition that the Leakbot stays active. Else, they can replace the AA batteries with longer-lasting Li batteries, but this should cost $1.5–3.5 more per LeakBot. And this would not help pass the valley of death, the potential lack of cash that Ondo might face within the next 2 years.

"There will come a day where customers will change insurance policies to a new insurer who supports leakbots so the retention rate will improve. " Agreed, but probably not significant over the next 2 years.

Good point about Nordics customers who already have the leakbot switching to new contracts, I hadn't contemplated that; I mainly thought about new customers. Hard to know how much it would represent. It could be significant, and at a zero CAC, essentially.

Good discussion, thanks, this is useful and I'm enjoying. I'll try to how much info/guesswork I can get on the potential of the Nordics and will try to play with the rest as well.

Andi: I'm not writing Nordics custsomres off, I am just saying that Ondo said they were expecting a big one-off sale in Sweden, which is nice, but not doing much long-term.

Great comment, thanks!

Where did you get that figure of the 50K leakbots in inventory?

I don't understand this: " 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 "

If 40K out of 100K devices are activated, that's a 40% activation rate.

Under the current conditions, CAC is $37.8 at 100% activation.

For the 50% margin, this is here:

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%.

1) As density improve, this will go up. I agree with your point (1), although not sure about 55%; maybe I'm underestimating the speed of COGS reduction.

2) Yes, I used the same for simplicity. In p16 of the presentation, the gross margin (50% for the US, 61% for Indiana) is meant to be the average gross margin over the lifetime of the Leakbot. Basically, that's what you have to consider to get the LTV they get (30*4.9=147 for the general US). Probably lower in the first year, and higher in the next few year.

With a margin of 60% in both years, Ondo is only negative in accumulated cash flow for two months, and only a little. At 61% like in Indiana, only one month (obviously, there will be slight variations, but that gives us an idea).

At 70%, it's positive all along.

Increasing density and reducing costs would certainly help.

3) is the company going away from autoship? I didn't see that.

4) Sure. I just try to add all the cash – cash in hand + inventory above 500K (the CFO said 500K was where they want to be) + raised money + contracts already signed and then model the cash going out, and see when/whether Ondo runs out. If COGS goes down, WC is sorted out. But we still have a massive Admin expense to cover. Once gross profit + DA is higher than Admin exp, then EBITDA is positive. For cash flow, it's a bit more complex.

EBITDA loss was £3.3m in H1, it should be £5.0–5.5m in H2, which means a much lower loss in H2, only £1.7–2.2m.

I don't see extra revenue being much higher than 500K, and if anything COS should go up if registration rate increases (because of increased CAC); logically, admin expense will go down, which would be great.

Or it could be that they are counting of this infamous Swedish. That'd buy us time, but I'd prefer admin expense to go down.

Upthemost, indeed, but note that it's not an insurer, it's a fund of funds. It's probably Symmetry Invest, who commented on the company on X. The guy has a great track record; I have a lot of respect for him.

Andii, re: "Lawrence, your worked example at 16:00 is almost impossible to follow ".

Sorry, I'm not sure what is not clear for you.

I advise you fill a table in excel for 24 months with:

Revenue ($5 per device per month, so $35K for 7K devices)

Cash inflow (1st month: $600K for 7K devices assuming 70% installation rate minus revenue for that month, then the highest between 0 and [revenue – deferred revenue]).

Deferred Revenue (Starts at $600K – $35K, remove $35K every month, until depleted).

CAC ($378K, only the first month).

COGS (50% of revenue, so $17.5K per month).

cash flow: cash inflow – CAC – COGS

accumulated cash flow: cash flow from previous month + cash flow of current month.

This way, you should be able to understand how it works better. It took me a while to really nail it. And maybe I haven't.

Andi, I understand that the order in Sweden would be a one-off. A welcome cash injection, for sure, but not a change in the big picture.

I agree that increasing density will reduce plumber travel time and improve margins overall. Indiana is currently the best-performing state, with a gross margin of 61%.

If the rate of activation increases, it will reduce CAC per device, and it will bring forward cash needs. If you reach 100%, Ondo gets $600K, spends $378K in cash acquisition ($37.8 per device) and $300K in COGS in year 1 (50% margin). So year one is negative cash flow now (accumulated cash flow of $–7.8 per device.

It's better, note because, this is actually the trough, vs $10.78 per device now. And it arrives much earlier.

Andii, the 70% figure is from the Q&A:

"The installation rate is different across markets—really high in Scandinavia, 80% in the UK, in the US it averages about 70%. That customer acquisition cost was based on a 70% installation rate in the US."

It works with the gross margin calculation in p16 of the presentation: for 10K sent leakbots, 7K are installed. Ondo gets $600K for 7K devices, so $85.71.

$54 is for CAC, because each leakbot causes $37.8 in total, 378K for 10K devices, but 378/7= $54 per installed device.

Gross margin is 50%, so Ondo gets 50% of $60 in year 1, or $30.

So cash is $85.71 – 54 – 30 = $1.71, which Ondo rounds at $2.

The whole* installed base.

I'm really sorry; I'm used to forums where I can edit, I really need to be more careful.