Desert Control AS

Welcome to the Desert Control Q1 2025 company update webcast. This presentation will cover the Q1 report and interim financial results for the fiscal period ending in March 31st, 2025. We will also share selected updates from Q2 2025 year to date. A Q&A session will follow the presentation and we invite you to use the Q&A function to submit your questions through the webcast. Before we can begin the Q&A update agenda, Desert Control Chair of the Board, Lars Eismark, will provide opening remarks and introduce our new CEO.

Thank you, Ari. Good afternoon and good morning to all of you from around the globe who are listening into this webcast presenting the Q1 2025 report. My name is Lars Eismark and I'm the Chairman of Desert Control. As mentioned in my intro in the first quarter report, we've left a quarter that was a satisfactory period for design control. Satisfactory because we continue winning important customers across landscaping and permanent crops, and because our pipeline grew with interesting opportunities. In particular, the wins based on our pace model is proof of the beliefs in our solution, and these wins are important to us. On top of this, The confirmation that our water conservation solution qualifies for incentive programs administered by the MWD and the LADWP marks an important milestone for Desert Control USA. And I'm confident that this will spark further interest in our solutions. So all in all, a satisfactory quarter for Desert Control. The first quarter also gave me an insight to the opportunities ahead of us. We've embarked on a journey that holds massive potential. regardless of where we and our partners look. But we need to sharpen the pen and ensure discipline in our go-to-market approach. We must base our go-to-market strategy on the successes and the momentum that we have right now. This means a stringent focus on the US market, specifically in the states where we already have successful deployments and trials, and specifically in the market segments where we have proven success. There are plenty of geographies, there are plenty of segments where our overall solution is highly relevant and attractive. We will go there in due time, but not before we have realized the attractive potential where we already are. Wherever we look, there are opportunities. The addressable market is substantial. Our pipeline is full of leads and opportunities, and we must pursue closings while at the same time balancing our go-to-market efforts. The efforts will be focused and prioritized with discipline, and most importantly, they will be accelerated. Accelerated through new hires, centralized efficiency measures, launch of improved deployment capacity, et cetera, et cetera. So a lot of positive things to look into. On April 23rd, we announced the CEO transition from Ole Christian Sigurdsson to James Thomas. Ole Christian has been instrumental in driving Desert Control to where we are today. It's been a massive pull from Ole Christian's side and the energy that has gone into the firm is truly admirable. Ole Christian, you have walked all the extra miles one could possibly ask for. And on behalf of the board, I want to thank Ole Christian for his efforts and wish him all the best for the new adventures that awaits Ole Christian and his family, both in Norway and in Thailand. Thank you, Ole Christian, and good luck. The board and I are immensely excited to see James Thomas taking over the baton from Ole Christian. James holds the skillset and the experience that is needed to migrate Desert Control into the next phase. With a solid track record, James has proven that he has what it takes to navigate Desert Control into a global company based on proven tech solutions, profitable market traction, global reach, and organizational scale. The board and I wish James the best of luck as you are taking charge for Desert Control. Q2 has kicked off as the first quarter. Lots of activity. I had the pleasure to visit our partner in Saudi. I have visited several customers in the US where I also met new joiners in our organization. And much more is planned until the end of June. I look forward to reporting back from my experiences and key takeaways. With these words, I hand it over to our new CEO, James Thomas.

Thank you, Lars. I appreciate that kind intro and I appreciate all you do to carry the mission of Desert Control forward because Desert Control is both a company and a mission. And your passion helps bring the excitement to the company that I feel from the employees and I feel myself. I shared a lot of my early thoughts in the letter that was released this morning. So forgive me if I hit some of those same highlights during the course of this conversation. But I think the company is really quite extraordinary and we have made some substantial progress and have, as Lars pointed out, a lot of opportunity ahead of us. I thought I might also kick off with a brief thought on how I ended up becoming attracted to Desert Control and why I feel I am the right person to lead the company at this time. And I do hope to get to know most of you over the course of the coming months and years. But I spent 30 years in the biotechnology venture capital business, developing companies everywhere from a scientist in a conference room to acquiring existing assets that needed to be marketed. And one of the things that attracted me to that process, frankly, was the ability of technology to transform lives and the ability of technology that transforms lives to build good businesses. And I see both of those things in Desert Control, and I'm excited TO TAKE THE COMPANY ON THE PHASE FROM WHERE WE STAND TODAY TO BEING A TRULY COMMERCIAL COMPANY THAT TRULY DOES CHANGE LIVES. SO I USED TO SAY THAT I LIKE TO MAKE MARGIN AND SERVE MISSION AND DESERT CONTROL, I THINK, AS A COMPANY THAT HAS THOSE IN SPADES. THE OTHER THING THAT ALWAYS ATTRACTED ME IN BIOTECH AND OTHER INVESTING BUSINESSES, PEOPLE. AT THE END OF THE DAY, WE'RE INVESTING IN PEOPLE, AND I FIND THE PEOPLE AT DESERT CONTROL, BY FEW, DEDICATED, INTELLIGENT, INTENTIONALLY QUITE COMMITTED AND VERY CREDIBLE, BOTH INTERNALLY AND EXTERNALLY. OUR CUSTOMERS AND THEIR COWORKERS ALL RESPECT AND THINK VERY HIGHLY OF THEM. SO I WANTED TO TOUCH ON THAT BECAUSE I THINK IT'S IMPORTANT AS WE ALL, YOU, ME, THE COMPANY AND OUR CUSTOMERS, start this next leg in the desert control journey. One other thing that I want to do is make sure that I address something that attracts me about this company and that I spoke to in the letter. I see LNC as a foundational technology. I think that we have seen already the benefits that LNC can bring to sandy soils, to slightly sandy soils, to mostly all the various grades of soil. But what we're beginning to see is the synergy benefits that LNC can bring to other parts of the soil ecosystem. So I'm still looking for a good analogy, and I welcome your thoughts. But I believe that LNC will turn out to be a technology that works very well on its own, but is additive or is the base under which many of these other biotechnology or microbial technologies can be added. I just am really excited about the role that LNC can play both in the commercial world and in the broader world of environment and health and safety. So with that, let me jump into the presentation at hand. I have today with me, in addition to Lars, we have Leo, our CFO. We also have Marty Wiens, who's our managing director for the US. And we have Jan Vader, who is both the chief innovation officer and our leader in the Middle East. And they will be available during the Q&A session. Ari, if I can get the next slide. Thanks. I think that many of you are very familiar with the desert control story, and I don't want to spend a tremendous amount of time on this slide, but to the extent that we do have new people with us, desert control specializes in nature-based solutions to combat desertification, soil degradation, and water scarcity. Liquid natural clay enables thirsty soils to retain water, nutrients, and improve soil health. Our clients already span agriculture, landscaping, and forestry, And I think we'll expand to other uses. And our solutions have proven to save water frequently as much as 50%, but certainly 25%, and improve health of the soil and crop yields. I think this is an area that you're going to hear more and more about from us. I think the science that we've developed and are developing in the field in our labs in Norway will continue to round out the many benefits that we see through LNC. Oh, I'm sorry. I couldn't see it on my screen. So I think Lars articulated this at the beginning. Our situation is that we have too much to do to be perfectly straightforward. The market opportunity and the opportunity for the product, both in established markets and emerging markets, is too big for us to tackle today. It's exciting because it provides almost infinite runway. But in the near term, you will see us focus very heavily on our markets in the Middle East and the US where we have established operations. With 110 countries exposed to desertification and hundreds of millions of hectares of potential, we really need this company to focus down right now and execute in our immediate priorities. All right, can I get the next slide? I think, you know, Many people have seen this slide. I touched on this on my letter. You know, one of the challenges that this technology has had over time is, frankly, making it. And we have had breakthroughs in this last several months and, frankly, last several quarters that now put us in a position to make sufficient quantities of high-quality LNC to begin to attack our large commercial opportunity. And so I think we'll touch on that on a later slide. But, and I emphasized it very much in my letter, I believe that we are going to be production constrained, not customer constrained in the very near future. And that's a function of all the traction that we're seeing in landscaping and golf and agriculture and other places that customers are really welcoming us in, including the World Food Program. This is the basic structure of the company presentation that we have had for the last several quarters. We'll be going through the highlights. Leo will pick up for the financial review. I'll come back to finish with our priorities and an outlook for the rest of the year, and then we'll go to the Q&A session. So what have we been up to? Well, you've seen a number of this in our press releases, but we have had, as Lars articulated, a very active period in the first quarter. We most notably delivered our largest application ever at Oasis States, where we treated 9,000 trees with LNC. And I think you'll hear over time that those results are quite promising. We achieved record levels of production, record levels of sustained production, and record levels of delivery of the product to the trees. BOTH WE AND THE CUSTOMER ARE QUITE HAPPY WITH THAT OUTCOME. WE ALSO HAD THE PILOT WOULD LET HILLS GO WELL AND ULTIMATELY IN THE SECOND QUARTER WE DID THE FULL DEPLOYMENT IN OUR FIRST HALF GOLF COURSE. AND I THINK THAT IS AN EXTRAORDINARY ACHIEVEMENT FOR A COMPANY OF THIS SIZE AND MATURITY. And I think it's really important that we talk directly about the water savings rebates with the Metropolitan Water District and the LA County Water District. I both want to make a big deal of these and not too big a deal of these. The direct effect for customers in the LA Water District is substantial. And we saw that at Woodland Hills. The quantity of money available for them rebates IS UP TO 50% OF THE COST OF OUR PRODUCT. AND SO IT'S A REALLY IMPORTANT DOOR OPENER IN THOSE AREAS AND THERE ARE MULTIPLE GOLF COURSES IN THOSE AREAS AND IN THE BROADER METROPOLITAN WATER DISTRICT. BUT IT IS WHAT I HOPE WILL BE THE FIRST OF MANY BECAUSE THERE ARE PROGRAMS REIMBURSING WATER SAVINGS TECHNOLOGY ACROSS THE AMERICAN SOUTHWEST, ACROSS AMERICA. many in the Middle East and other parts of the world. So I look at the win at the Metropolitan Water District and the only water district as indicative of our ability to get governments to buy into the value of LNC almost as much as the simple fact that we'll open doors for us with golf courses that fall in those places. I think you're going to hear more about the Middle East perhaps a little bit later in the Q&A, but we had our partners, I want to be very clear, there are our partners, both Soil and DESERT CONTROL, HAD VERY ACTIVE FIRST PARTS OF THE YEAR AND ARE SETTING UP, I THINK, FOR A LOT OF SUCCESS LATER IN THE YEAR. AND ON THE TECHNOLOGY, YOU KNOW, I'm probably making more of this in some ways than the team would be comfortable because they're pretty humble. But the advances we've made in production technology are really, really important to us and will enable the growth that I hope to drive through this company. And the research team, while small and quiet, is really pushing forward the boundaries of where this technology can be applied. And I think we will continue to see markets expand, addressable markets expand, LNC, both in the U.S., Middle East, and around the world. All right, if I can get the next slide. So just a quick update here. I think this is well in the marketplace, but this was a major undertaking for our operations group, and they executed it extremely well, and all of the initial reports from the customer are quite happy. So THIS IS ALSO SOMETHING THAT I THINK WE'VE TOUCHED ON A LOT, BUT IT'S REALLY IMPORTANT BECAUSE AS THIS SLIDE POINTS OUT, THIS DEAL CAME TOGETHER FROM A PILOT TO AN APPLICATION OF A MULTI-YEAR REVENUE SHARING AGREEMENT IN SIX WEEKS. AND WE ARE NOT GOING TO GET THAT SALE CYCLE TIME WITH ALL OF OUR CUSTOMERS, BUT I KNOW THAT ALL OF US AT DESERT CONTROL AND MANY OF YOU ON THE PHONE CALL TODAY HAVE BEEN FRUSTRATED BY THE LENGTH OF SALE CYCLE THAT SOME OF OUR CUSTOMERS WILL TAKE. SO I JUST WANT TO POINT OUT THAT WHEN THE STARS ALIGN, AS THEY DID AT WOODLAND HILLS, THIS IS A CLUB THAT HAS A HIGH COST OF WATER THAT KNOWS THEY NEED TO ADDRESS IT, THAT WAS INTERESTED IN TECHNOLOGY, AND THEN THE L.A. WATER DISTRICT AND METROPOLITAN WATER DISTRICT WAS ICING ON THE TAPE. I ALSO WANT TO EMPHASIZE, AND I DID EMPHASIZE THIS IN THE LETTER, that I love the Pays model. And this is our first real Pays model. And I'm hoping to do many, many more. I think the Pays model is good for the customer because it reduces their entry risk with shortened sales cycle. I think it's good for us because it forces us to put our money where our mouth is. And I think it's good for us because by taking on that extra risk, I think we're going to make significantly more money on our Pays contracts No offense to guys who want to pay up front. Happy to have plenty of those two, but I really do like this base model. I think here we touched on most of this already, so I won't dwell on it, but it's an important win. And as I say, it provides a lot of upside in that regional area where there are 19 million people and a whole lot of golf courses. But I view this as much more of a FRONT END OR SHARP END OF THE SPEAR AND WE AND THE TEAM CONTINUE TO FOCUS ON AREAS WHERE WE CAN BRING THIS VALUE TO CLIENTS. SO THIS SLIDE BRINGS UP OUR MOMENTUM IN THE MIDDLE EAST WHICH I THINK I COVERED SOME OF EARLIER IN MY PIECE BUT IT'S EASY TO KIND OF LUMP THE MIDDLE EAST AS THE MIDDLE EAST OR THE UAE IS THE UAE OR SAUDI IS SAUDI BUT I THINK WHAT YOU SEE ON THE SLIDE IS THE DIVERSITY of customer types we're addressing across the region. And frankly, the scale of the diversity of the customer types. Some of these places are good-sized residential real estate. Some of these are golf courses. Some of these are quantities of park acreage or forests that are just almost inconceivable in my daily life of chasing customers in the U.S. So we had a good start to the year in the Middle East. Jan's on the call. I think we can talk more about that later. The United Nations Food Program. This is something that I am so excited about from a mission standpoint. I'm so excited about it from a credibility because this is not an easy thing to break into. And I'm so frustrated about because we haven't already put a lot of LNC in all kinds of parts of the world that we need to do it. But what's important here is we're about to really deploy LNC for the first time under the World Food Program. And in the first quarter, our partners in this project did the underlying readiness preparation work. We have, I think, and you can hear that from Jan, finally gotten the visas and all of the other logistics sorted out, and we should be able to deploy this in coming weeks. But super exciting, and again, one of those things That's the beginning of a big effort rather than the end in itself. Back to production. How excited I am about production. I don't know how many times I'm going to say this today on this call, but I'm excited about production. And this is, I think, hopefully going to give you that sense. We make the product. We've been making the product for years. We're good at making the product. We started making it in the large tractor trailer driven units. They're perfect for certain applications, but you don't want to pull up in a residential neighborhood in LA with two tractor trailers and a whole big crew and start spraying at LNC and be there for a week or more. We're so excited about the next generation prototype because this is a product that will burn. system that can be deployed on a pickup truck or two because some places we're going to need two and can get into areas that a tractor trailer could never get into and produces almost six times as much material sometimes eight times as much material as the existing Oasis unit so I really can't emphasize enough how important this is to us and I cannot wait to get these things built and deployed both in the US and with our customers in the Middle East. And I think this slide, I think you've seen this slide or version of this slide before, this is a game changer. And this is something that I think we are going to see, and we're now in this prototype phase, the semi-automated phase. As any good technology company, we should see continued evolution IN OUR TECHNOLOGIES ACROSS BOTH THEIR APPLICATIONS AND THEIR PRODUCTION. SO THE TEAM IS NOT STOPPING OR RESTING HERE, BUT I THINK YOU WILL SEE US GET THESE UNITS DEPLOYED AND THEN MOVE TO UNITS THAT HAVE EVEN LARGER CAPACITY AND FRANKLY SOME THAT MAY HAVE SMALLER CAPACITY AND ARE YET LIGHTER AGAIN FOR CERTAIN JOBS WHERE WHETHER IT'S A SHOPPING CENTER OR OTHER KIND OF PLACES, MOBILITY IS MORE IMPORTANT THAN THRUPA. We find ourselves more than midway through the presentation. I hope that gave you a sense of my thoughts on how the company is doing and some of the highlights of the last period. I'm going to turn it over now to Leo for the financials. I will come back briefly for the outlook, and then we'll get to your questions.