Ondo InsurTech PLC (LSE:ONDO), known for its claims prevention technology for the home insurance industry, reported a 29% increase in revenue, with recurring revenue from software and services rising by 41%. Foster emphasised that these results align with broker forecasts and demonstrate the company's robust progress.
A notable development is Ondo InsurTech's expansion in the US market. The company has signed new contracts with major insurers, including Nationwide, and has shifted to a recurring revenue model.
This strategy has already shown positive results, with US customers accounting for 12% of recurring revenues despite being only 3% of the customer base.
Stephen Gunnion (Proactive): Hello, you're watching Proactive. Joining me is Craig Foster, the CEO of Ondo InsurTech. You've got your full-year results out, and you've also announced another contract win in the US and you're on an investor roadshow. So perhaps starting with the results that really illustrate the strong progress you made last year.
Craig Foster: Yeah, that's right. Our results were out on Monday. We're still a relatively new company. So, to remind viewers, Ondo is on a mission to become a world-leading company in claims prevention technology, specifically for the home insurance industry. We see a future that is becoming a reality where Internet of Things technologies are used as standard to protect homes, reduce risk, and prevent waste. We're really leading that change with our solution called LeakBot. It's a water damage prevention system. It's now used by 18 insurers around the world. We announced on Monday that we're now in 111,000 homes and have a plus 91 Net Promoter score. So homeowners love the solution.
The message in the results this week was that targets have been met. We delivered exactly in line with broker forecasts. Growth has been delivered across the customer base and top-line revenue. But the really important message was that the foundations have been laid for really fast and exciting US-powered growth in the future, driven by the breakthrough in the United States that we've made this year.
Gunnion: So, Craig, you talked about top-line growth. Your revenue or your sales are up 29%, and the recurring revenue from software and services is up 41%. That must be very encouraging.
Foster: Yeah, it's been a deliberate strategy. We've deliberately moved away from driving revenue from device sales because our solution comprises an Internet of Things sensor that we install in the home. We also provide insurers with a suite of services, including an in-home plumbing service to go find and fix the root cause of the problem.
Increasingly, in all the US deals we've been doing, we've been moving to a flat, recurring revenue model, which is much better for us in the long run as a company. But it means you don't get that immediate spike from one-off device sales, and you can really see that in our numbers. Recurring revenues grew by 41%, whereas the unit sales were a much lower percentage of growth, and the exit rate was 1.7 million on the recurring revenue. So that's been a very deliberate shift for us.
Gunnion: You also talked about your US partners in four states. In fact, you've now signed up another partner that was announced yesterday. So it was a contract with a super-regional insurer. Tell me how this augments your business in the US.
Foster: Yeah. It's been an interesting year because what we tried to convey in the results is that we've really laid those foundations for US growth, although you don't immediately see it in the headline numbers. If you look at our results to the end of March 2023, we announced and reported on the number of addressable households. So, how many homes could we get into through the contracts that we've already signed? We had a big jump from half a million to over 2 million in the results a year ago. That was because of a load of contracts that we'd won in the Nordics.
If you look at this year's results that we reported on Monday, 73% of our growth came from Scandinavia because of those prior contract wins. If you look at the results on Monday, what you can see is there's been another big growth in addressable households, increased over double, 2.2 times growth, really driven by all the new contract wins in the United States, most notably Nationwide, who are one of the biggest carriers there.
Although you don't see it immediately, the US was 9% of our customer growth, which started to pull through. But what's interesting is those 3% of our customer base, the new customers that we've recently won in the United States, are already delivering 12% of our recurring revenues. It really underlines why, from a financial point of view, the US is a great market for us.
The reason for this is that US homeowners spend much more on home insurance. The average policy premium is approaching $1,500. The average price people pay for home insurance in the US is much higher than in the UK. The cost of claims in the US is extraordinary. US insurers pay $16 billion a year to repair houses due to small leaks in the home. These are leaks that our solution can uniquely detect. There's nothing else like it on the market. It's a small, self-installed solution that you put on the pipe. The reason this has been a breakthrough for us in the US is that US insurers liked our pitch, but the question was, can you deliver the same results in the US as you've done in Europe?
Länsförsäkringar in Sweden recently reported that they've seen a 40% reduction in their claims costs as a result of deploying our solution. That raises eyebrows in the US when we quote that statistic because US insurers are spending $16 billion a year, and we have the potential to reduce that by 40%
But the question was, can we do it in the US? We've launched in four states: Washington, New York, New Jersey, and Ohio, with four different insurers: Selected, Pure Underwriting, Mutual of Enumclaw, and Nationwide, one of the biggest carriers in the US. We've done reviews with all of those carriers and shown them the return on investment that we can immediately deliver. We've shown them the customer satisfaction. We've already delivered a Net Promoter score in the United States that's higher than the likes of Apple. So we've really proven that we can do it.
All of those partner reviews have led those partners to want to do more activity and expand their programs with us. It's led to a healthy pipeline of new prospects in the US, especially because Nationwide, one of the most well-respected and largest carriers in the US, has really backed our solution. So it's a very exciting time for the business. The prospects in the US especially look really good.
Gunnion: How do you see 2025 panning out for the company, Craig?
Foster: Well, in one regard, I would say it's going to be very boring because we're going to absolutely stick to the strategy. We outlined the strategy again in our investor presentation yesterday, and it's very consistent. We're going to focus on those core markets. We're not going to be distracted with going outside of Scandinavia, the UK, or the United States at the moment. The reason is we're still a small company today.
The opportunity we've got immediately in front of us with those partners and the pipeline is absolutely huge. So we're going to stick squarely to those core markets. Our core customer is that B2B customer, the insurance company. The model is going to be very consistent. All 18 of our insurers follow the same model. They give the device away for free, they give the repair service away for free, and they pay us largely on a recurring basis in the background to provide that. The name of the game now is about consistency of delivery and seeing how fast we can crank that growth handle.