Airthings — Interim / Quarterly Report 2023

Jul 14, 2023

2Q and first half report 2023

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Robust growth

Airthings at a glance

A hardware-enabled software company solving real issues

• Global leader in indoor air quality solutions
• Serving consumers, businesses, and professionals
• Empowering the world to breathe better

Supported by lasting factors & megatrends Energy Health tech Sustainability Regulations Smart home 21.0 33.7 35.4 2020 2021 2022 Revenues (USDm) +69% 1.1 2.9 3.6 2020 2021 2022 ARR (USDm) +218%

Delivering elegant products and actionable insights

International and expanding presence

efficiency

Key highlights

1

Entry into the California school market with 5,000 devices s sold

under the CalSHAPE program with significant potential for expansion

2

Long-term megatrends fueling Regulatory tailwinds

expected to boost demand for IAQ monitors

3

Launched Space Utilization

The first-ever indoor air quality monitoring tool with occupancy detection, in the Airthings for Business dashboard

4

Wave Radon Home Depot expansion

With rollout across 800 Home Depot locations

7

5

up 9% year-on-year

Total ARR reached USD 4.0m

up 25% year-on-year

2Q22 3Q22 4Q22 1Q23 2Q23 * excl. inventory impairment of Airtight.

3

Operationalreview

Revenue and margin development

Airthings recorded sales revenue of USD 7.5 million in 2Q23, up 9% year-on-year and down 15% quarter-on-quarter in what is typically the slowest quarter of the year. Year-to-date revenues were USD 16.2 million, up 2%.

The Consumer segment showed 14% yearon-year revenue growth supported by continued promotional activities. Airthings for Business was down 2% compared to 2Q22, reflecting continued market caution in the Business segment.

100 202 258 0 100 200 300 400 500 1Q20 2Q20 3Q20 4Q20 1Q21 2Q21 3Q21 4Q21 1Q22 2Q22 3Q22 4Q22 1Q23 2Q23 Consumer Device Registrations (Indexed - 1Q2020 = 100) +28%

End-customer demand remains relatively healthy, with Consumer new device registrations from smart products increasing 28% year-on-year. Since the start of the year, the company has also seen a 15% increase in users owning more than one device.

Gross Profit came in at USD 4.6 million in 2Q23, corresponding to a solid gross profit margin (GPM) of 62%. This compares to 58% in 2Q22 and is a significant increase from 56% in 1Q23.

Annual recurring revenue (ARR)

Annual Recurring Revenue (ARR) came in at USD 4.0 million in 2Q22, representing 25% growth year-on-year. The year-on-year increase is reflective of the growth achieved in Airthings for Business. For the second quarter, ARR came in at the low end of the guided range of USD 4.0 – 4.3 million, mainly attributed to reduced sales in the Pro segment and currency effects. The gross margin from ARR revenue remains >80%.

Product and Marketing

Airthings completed the second quarter of 2023 with launches of several new products and tools boosting brand awareness and market exposure. For Consumer, the Wave Plus Black was launched on Airthings.com and Amazon and promoted with a prominent video featured in AdWeek. For Airthings for Business, the company launched Space Utilization, the first-ever indoor air quality monitoring tool with occupancy detection, at RealComm in Las Vegas. The tool is backwards compatible with existing devices in the field and enables several new use cases and improved energy insights to make buildings more efficient. In addition, the new Airthings for Business mobile app, the facility manager's best friend, was launched at the Facilities Show in London.

Regulations and guidelines

Airthings' long-term growth ambitions are supported by long-term megatrends fueling the demand for healthy indoor air quality (IAQ) and sustainable and energy efficient solutions. These powerful macro drivers are triggering regulations and guidelines from regulatory bodies seeking to incentivize healthy and sustainable solutions.

In the US, the Centers for Disease Control and Prevention (CDC) recently issued new IAQ guidelines, followed shortly after by the release from the American Society for Heating, Refrigerating, and Air-Conditioning Engineers (ASHRAE) of a draft standard for maintaining Indoor Air Quality (IAQ). While not yet regulatory requirements, these developments are encouraging signs that additional states will adopt policies requiring monitoring of IAQ in schools, beyond the seven states which currently do so today. Together, these seven states represent roughly 8.3 million students and approximately 300,000 classrooms. Chief among them is California, which provides funding for CO2 monitors in every classroom under the California Schools Healthy Air, Plumbing and Efficiency Program (CalSHAPE).

These developments in the US align with similar directives and guidelines already issued by the EU. The Energy Performance of Buildings Directive (EPBD) requires member states to establish minimum energy performance requirements for buildings, and the Indoor Air Quality Directive (2009/125/EC) establishes minimum requirements for energy efficiency and indoor air quality. Continuous monitoring enables building operators to demonstrate compliance.

These regulatory tailwinds are expected to significantly boost the demand for IAQ monitors and solutions that can improve health and wellbeing, as well as make existing buildings smarter and more energy efficient in the years ahead.

Risks and uncertainty

Please see note 14 of the 2Q 2023 report and note 6.3 of Airthings' 2022 consolidated financial statements for reference. The company has not identified any major changes to risks and uncertainties since publication of the 2022 Annual Report. Airthings considers the company's overall risk exposure for the upcoming 6 months to be at a low to moderate level and key operational risks including credit risks, currency risks and interest risks are actively monitored and supervised on an ongoing basis. Airthings had a cash balance of USD 17.4 million at the end of 2Q 2023, and the Board considers the liquidity risk to be low.

Outlook and guidance

Airthings reported revenue of USD 7.5 million in 2Q23, up 9% year-on-year and towards the lower end of the USD 7.0 – 9-0 million range guided alongside the first quarter results.

USDm	Revenue and ARR Guidance 3Q23
Revenue	9.0 - 12.0
ARR	4.1 - 4.4

Consumer revenue increased by 14% year-on-year to USD 5.0 million, whereas Airthings for Business (AfB) slightly down from the prior year with revenues of USD 2.0 million. Airthings for Professionals reported revenue of USD 0.5 million.

Distributors remain cautious on inventory management and the investment climate remains guarded in the business segment. Despite these conditions, the company is seeing growth, albeit limited. Furthermore, Airthings' outlook is supported by favorable tendencies in the regulatory environment. As such, Airthings expects the market to shift and demand to increase over the longer term.

Since the first quarter, Airthings has started the implementation of a strategy refinement focused on honing the go-to-market strategy, reinforcing a software centric product focus, and improving the operating model. While it will take time to see the full effect of the new strategic direction, the company is already seeing promising developments. Airthings' internal channel is generating increased sales, the company has launched new and improved services and tools, efforts are underway to revamp the logistical setup, and operational expenses are down both year-on-year and quarter-on-quarter.

While recognizing that the challenging market conditions are likely to remain in the coming quarters, the company is well-positioned for future growth. Airthings for Business has made a notable entry into educational institutions in California, with significant potential for further expansion. The company is also observing more muted seasonality effects in the Consumer segment compared to previous years and are cautiously optimistic about seeing stronger growth over the remainder of 2023.

Promotional efforts to bring down own inventories have begun to take effect, although the inventory levels are still elevated. Promotional activities will hence continue in the coming quarter, supporting sales but to a certain degree continuing to affect gross margins.

Revenue in 3Q23 is expected to end in the range of USD 9.0-12.0 million, compared to USD 10.1 million in the same quarter last year. ARR is expected to increase to USD 4.1 – 4.4 million at the end of 3Q23, up 20-28% year-on-year.

Segment overview

Airthings for Consumer

Revenue from Airthings for Consumer came in at USD 5.0 million in 2Q23, up 14% year-on-year. 2Q is typically the slowest quarter of the year, and sales were down 22% quarter-on-quarter. Year-to-date revenues in the segment were USD 11.4 million, up 8%.

The Consumer segment has maintained notable growth in device registrations for connected products, showing a 28% year-on-year increase in the second quarter. This indicates healthy sellthrough to end-customers partially influenced by the heightened promotional activities in the quarter. The company is also seeing more customers adding more devices, as demonstrated by a 15% year-to-date increase in customers owning more than one device.

In 1Q23, the company announced a refinement of its strategic direction. An increased focus on improving sales through own channels is already showing results, with over 70% year-to-date sales growth on Airthings.com. A heightened in-depth focus on existing customers is also paying off, as Airthings expanded its product offering with Home Depot in the quarter and rolled out Wave Radon across 800 locations. Similarly, significant volumes of product were sold to Amazon, including orders secured and shipped ahead of Prime Day activities throughout July.

Gross margins in Consumer are still affected by promotional campaigns to reduce inventory placing downward pressure on price-points. That said, gross margin came in at 58% in 2Q23, compared to 58% in 2Q22 and up significantly from 49% in 1Q23.

Airthings for Business (AfB)

Revenue from Airthings for Business came in at USD 2.0 million in 2Q23, down 2% year-on-year and up 13% quarter-on-quarter. Year-to-date revenues in the segment were USD 3.7 million, down 13%.

The number of devices in the field increased by approximately 4% from the first quarter and is up 54% year-on-year.

Gross profit for Airthings for Business came in at USD 1.3 million in 2Q23, with a gross margin of 67%. This compares to 69% in the previous quarter and up from 53% in 2Q22 when the results were negatively impacted by an inventory impairment of the Airtight product.

In the first quarter, Airthings signed a deal to equip 15 schools across California with nearly 5,000 air quality monitoring devices under the California Schools Healthy Air, Plumbing and Efficiency Program (CalSHAPE). The program authorizes funding to more than 10,000 educational institutions for assessing, maintaining, repairing, or upgrading ventilation systems. The deal signifies a strong first entry for Airthings to provide CO2 monitors to the educational institutions covered under CalSHAPE.

In addition, Airthings announced a new partnership with Rentokil Initial after the end of the quarter. Rentokil Initial is a global leader in commercial pest control and hygiene services, operating in over 90 countries. The partnership combines Rentokil Initial's expertise in hygiene and purification services with Airthings' advanced monitoring technology to provide comprehensive and accurate indoor air quality data for businesses. Airthings' monitors will be utilized by Rentokil to map out issues within their customers' facilities and target the root causes of poor air quality in schools, commercial real estate, and shopping malls.

The partnership with Rentokil Initial provides a solid proof-point that Airthings can build strong relationships with the largest players in the Heating, Ventilation and Air Condition (HVAC) industries and global enterprise customers in the US and EU. A new experienced VP of Sales for EMEA and APAC has recently been hired from Schneider Electric to further support these efforts. Taken in combination with recent improvements to the product offering in terms of the energy savings potential for end-users, Airthings is well-positioned to capitalize on improvements in the macro environment and investment climate when they materialize.

Airthings for Professionals

Sales revenue from the PRO segment reached USD 0.5 million in 2Q23, reflecting a continued challenging US home inspector market. Year-todate revenues in the segment were USD 1.1 million, down 2%.

Gross profit from the Pro segment was USD 0.5 million in the quarter, with a margin of 86%. This compares with 80% in 2Q22 and 87% in 1Q23.

Oslo, 13 July 2023

Geir Førre Chairman of the Board

Emma Tryti Board member

Karin Berg Board member

Liv Dyrnes Board Member

Niklas Norin Board member

Chloe Waller Board member

Aksel Lund Svindal Board member

Øyvind Birkenes CEO

10

Financials

Financial highlights (IFRS)

Key financials (USD 1,000)	2Q 2023	2Q 2022	Δ	YTD 2023	YTD 2022	Δ	2022
Total revenue	7,457	6,851	9%	16,208	15,913	2%	35,424
Gross profit	4,627	3,979	16%	9,492	9,306	2%	20,959
Gross margin	62%	58%		59%	58%		59%
EBITDA	-2,734	-5,383		-5,940	-8,816		-11,785
EBIT	-3,109	-7,285		-6,703	-11,094		-14,662
Profit (loss) before tax	-2,825	-5,756		-5,429	-9,853		-13,697
Annual Recurring Revenue	4,012	3,202	25%	4,012	3,202	25%	3,602

Consolidated statement of profit or loss

For details related to revenue and gross profit, please see 'Operational review' and "Segments".

Operating expenses for the group came in at USD 7.4 million in 2Q23 and USD 15.4 million for the first half 2023, down 15% YoY from USD 18.1 million from first half 2022. The reduction is primarily driven by operational improvements, as well as a range of one-off costs in the first half of 2022.

EBITDA came in at negative USD 2.7 million in 2Q23 and negative USD 5.9 million for the first half 2023.

Depreciation, amortization during 2Q23 was USD 0.4 million and USD 0.8 million in the first half of 2023, driven by depreciation of right-of-use assets for the period for leases recognized under IFRS 16 (see note 7).

EBIT came in at negative USD 3.1 million in 2Q23 and negative USD 6.7 million in the first half 2023.

Net financial items consist primarily of exchange rate fluctuations between USD and NOK and interest expense on the IFRS 16 lease liability.

Profit (loss) before taxes was a loss of USD 2.8 million in 2Q23 and a loss of 5.4 million in the first half 2023.

Tax income was USD 0.6 million in 2Q23 and USD 1.1. million for the first half 2023 (see note 8). This resulted in a net loss of USD 2.2 million in 2Q23 and a net loss of USD 4.3 million for the first half 2023.

Consolidated statement of financial position

Total assets at the end of 2Q23 were USD 63.0 million (end 1Q23: USD 65.6 million), split between non-current assets is USD 16.7 million (end 1Q23: USD 16.4 million), and current assets of USD 46.4 million (end 1Q23: USD 49.1 million). Non-current assets are mainly made up of goodwill, intangible assets, deferred tax assets and right of use assets. Current assets are mainly made up of USD 17.4 million in cash and cash equivalents, inventories and trade receivables. During the quarter, inventories and trade receivables decreased by USD 0.9 million and USD 2.2 million respectively due to the company's heightened focus on improving its working capital situation. Since 2022, inventories are down USD 2.5 million and trade receivables have fallen by USD 2.9 million.

The book value of equity is USD 49.3 million (end 1Q23: USD 52.9 million). This equates to an equity ratio of 78.2% (end 1Q23: 80.7%)

Total liabilities were USD 13.7 million at the end of Q2 2023 (end 1Q23: USD 12.7 million). The increase is primarily driven by funding received from Innovation Norway (see note 10).

Non-current liabilities is mainly made up of interest-bearing liabilities and lease liabilities. Other current liabilities consist of deferred revenue related to subscription service, public duty taxes, personnel related accruals and other accrued expenses.

Consolidated statement of cash flows

Total cash and cash equivalents balance

increased by USD 1.9 million from 1Q23 to USD 17.4 million. Primarily driven by funding received from Innovation Norway (see note 10).

Cash flow from operating activities came in at positive USD 2.6 million in 2Q23 and negative USD 0.7 million in first half 2023 mainly driven by a loss before tax offset by positive working capital as a result of the company's heightened focus on improving its working capital situation as well as external financing.

Cashflow from investment activities was

negative USD 0.3 million in 2Q23 and negative USD 0.8 million in first half 2023 driven by capitalization development costs.

Cashflow from financing activities was positive USD 1.1 million in 2Q23 and USD 8.0 million in first half 2023 mainly related to the funding received from Innovation Norway and the private placement in 1Q23.

Consolidated statement of profit or loss

			Audited
Amounts in USD 1,000	Notes	2Q 2023	2Q 2022	YTD 2023	YTD 2022	2022
Revenues	4, 5	7,457	6,851	16,208	15,913	35,424
Total revenues		7,457	6,851	16,208	15,913	35,424
Cost of goods sold	7	2,830	2,872	6,716	6,606	14,465
Employee benefit expenses	6	4,261	4,999	8,433	9,431	16,654
Other operating expenses	6	3,100	4,363	6,999	8,692	16,090
Operating profit or loss before depreciation & amortization (EBITDA)		-2,734	-5,383	-5,940	-8,816	-11,785
Depreciation, amortization and impairment	7	375	1,903	762	2,278	2,877
Operating profit or loss (EBIT)		-3,109	-7,285	-6,703	-11,094	-14,662
Net financial items		285	1,529	1,273	1,241	965
Profit (loss) before tax		-2,825	-5,756	-5,429	-9,853	-13,697
Income tax expense	8	-612	-1,306	-1,136	-2,271	-3,131
Profit (loss) for the period		-2,212	-4,451	-4,293	-7,582	-10,566
Profit (loss) for the year attributable to:
Equity holders of the parent company		-2,212	-4,451	-4,293	-7,582	-10,566
Earnings per share:
Basic earnings per share	12	-0.01	-0.03	-0.02	-0.04	-0.06
Diluted earnings per share	12	-0.01	-0.03	-0.02	-0.04	-0.06

Consolidated statement of comprehensive income

			Unaudited			Audited
Amounts in USD 1,000	Notes	2Q 2023	2Q 2022	YTD 2023 YTD 2022		2022
Profit (loss) for the period		-2,212	-4,451	-4,293	-7,582	-10,566
Other comprehensive income:
Items that subsequently will not be reclassified to profit or loss:
Exchange differences on translation of parent company		-1,432	-7,721	-4,645	-7,299	-7,025
Total items that will not be reclassified to profit or loss		-1,432	-7,721	-4,645	-7,299	-7,025
Items that subsequently may be reclassified to profit or loss:
Exchange differences on translation of foreign operations			2	2	1
Total items that may be reclassified to profit or loss			2	2	1
Other comprehensive profit (loss) for the period		-1,432	-7,719	-4,643	-7,298	-7,025
Total comprehensive profit (loss) for the period		-3,644	-12,170	-8,937	-14,880	-17,590
Total comprehensive profit (loss)
Equity holders of the parent company		-3,644	-12,170	-8,937	-14,880	-17,590

Consolidated statement of financial position

		Unaudited		Audited
Amounts in USD 1,000	Notes	30.06.2023	30.06.2022	31.12.2022
ASSETS
Non-current assets
Goodwill	7	2,628	2,841	2,872
Intangible assets	7	2,840	1,495	2,459
Deferred tax assets	8	7,665	6,065	7,108
Property, plant and equipment		729	916	830
Right-of-use assets		2,740	3,488	3,140
Other non-current assets	13	82	190	132
Total non-current assets		16,684	14,995	16,541
Current assets
Inventories		16,168	16,413	18,713
Trade receivables		8,152	9,225	11,099
Other receivables		4,662	2,939	4,115
Cash and cash equivalents	9	17,380	23,370	13,274
Total current assets		46,363	51,746	47,202
TOTAL ASSETS		63,047	66,742	63,743

		Unaudited		Audited
Amounts in USD 1,000	Notes	30.06.2023	30.06.2022	31.12.2022
EQUITY AND LIABILITIES
Equity
Share capital	11	215	191	192
Share premium		86,362	78,838	78,979
Other capital reserves		2,281	1,922	2,068
Other equity		-39,532	-27,600	-30,311
Total equity		49,326	53,350	50,928
Non-current liabilities
Non-current interest-bearing liabilities	10	1,300
Non-current lease liabilities		2,156	2,874	2,554
Non-current provisions	13	72	183	125
Total non-current liabilities		3,529	3,058	2,679
Current liabilities
Current lease liabilities		837	853	850
Trade and other payables		5,611	6,281	6,177
Contract liabilities		1,296	971	1,111
Income tax payable		32	9	60
Current provisions	10	2,416	2,222	1,963
Total current liabilities		10,192	10,334	10,137
Total liabilities		13,721	13,392	12,816
TOTAL EQUITY AND LIABILITIES		63,047	66,742	63,743

Geir Førre Chairman of the Board

Emma Tryti Board member

Karin Berg Board member

Oslo, 13 July 2023

Liv Dyrnes Board Member

Aksel Lund Svindal Board member

Chloe Waller Board member

Niklas Norin Board member

Øyvind Birkenes CEO

17

Consolidated statement of cash flows

		Unaudited Audited
Amounts in USD 1,000	Notes	2Q 2023	2Q 2022	YTD 2023	YTD 2022	2022
Cash flows from operating activities
Profit (loss) before tax		-2,825	-5,756	-5,429	-9,853	-13,697
Adjustments to reconcile profit before tax to net cash flows:
Net financial items		-285	-1,529	-1,273	-1,241	-965
Depreciation, amortization and impairment	7	375	1,903	762	2,278	-2,877
Share-based payment expense	13	214	108	214	218	364
Working capital adjustments:
Changes in inventories		948	-3,466	2,545	-4,984	-7,284
Changes in trade and other receivables		3,767	2,162	2,399	1,575	-1,476
Changes in trade and other payables and contract liabilities		-660	-884	-381	-670	-633
Changes in provisions		1,029	173	425	-1,012	-1,354
Net cash flows from operating activities		2,564	-7,290	-738	-13,690	-22,169
Cash flows from investing activities
Development expenditures	7	-412	-505	-826	-968	-2,145
Purchase of property, plant and equipment			-81	-26	-225	-341
Interest received		79	3	101	3	258
Net cash flow from investing activities		-333	-583	-750	-1,190	-2,228
Cash flow from financing activities
Proceeds from issuance of equity	11		55	7,122	170	312
Proceeds of interest-bearing liabilities	10	1,300		1,300
Payments for the principal portion of the lease liability		-180	-176	-364	-360	-698
Payments for the interest portion of the lease liability		-40	-53	-85	-110	-201
Net cash flows from financing activities		1,080	-175	7,972	-300	-586
Netincrease/(decrease)in cash andcash equivalents		3,311	-8,048	6,484	-15,193	-24,983
Cash and cash equivalents beginning of the period		15,426	35,607	13,274	42,174	42,174
Net foreign exchange difference		-1,357	-4,389	-2,378	-3,824	-3,917
Cash and cash equivalents at end of the period		17,380	23,170	17,380	23,170	13,274

Consolidated statement of changes in equity

			Other equity
Amounts in USD 1,000	Share capital	Share premium	Other capital reserves	Cumulative translation differences	Retained earnings	Total equity
Equity 31 December 2021	190	78,669	1,704	1,962	-14,683	67,842
Profit (loss) for the period					-5,582	-5,582
Other comprehensive profit (loss)				-7,298		-7,298
Total comprehensive profit (loss)				-7,298	-5,582	-14,880
Capital increase (note 11)		1 169				170
Share-based payments (note 13)			218			218
Equity 30 June 2022	191	78,838	1,922	-5,336	-22,625	53,350

				Other equity
Amounts in USD 1,000	Share capital	Share premium	Other capital reserves	Cumulative translation differences	Retained earnings	Total equity
Equity 31 December 2022	192	78,979	2,068	-5,062	-25,248	50,928
Profit (loss) for the period					-4,293	-4,293
Other comprehensive profit (loss)				-4,643
Total comprehensive profit (loss)				-4,463	-4,293	-8,937
Capital increase (note 11)	23	7,383				7,406
Transaction cost share issues					-285	-285
Share-based payments (note 13)			214			214
Equity 30 June 2023	215	86,362	2,281	-9,706	-29,826	49,326

Notes

Note 1: Corporate information

Airthings ASA ('the Company') is a publicly listed company on Oslo Stock Exchange, with the ticker symbol AIRX. Airthings ASA is incorporated and domiciled in Norway with principal offices located at Wergelandsveien 7, 0167 Oslo, Norway.

Airthings and its subsidiaries (collectively 'the Group', or 'Airthings') develop and produce solutions for monitoring indoor air quality, radon and energy efficiency. The Group sells its products and solutions to consumers and businesses around the world.

The interim consolidated financial statements of the Group for the period ended 30 June 2023 were authorized for issue in accordance with a resolution of the Board of Directors on 13 July 2023.

Reference is made to note 4.1 in the Group's consolidated financial statements for the year ended 31 December 2022 for a list of subsidiaries.

Note 2: Basis of preparation and significant accounting policies

The interim consolidated financial statements of the Group comprise consolidated statement of comprehensive income, consolidated statement of financial position, consolidated statement of cash flows, consolidated statement of changes in equity and selected explanatory notes. The interim consolidated financial statements have been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the European Union ('EU').

The interim consolidated financial statements do not include all the information and disclosures required in the annual financial statements and should be read in conjunction with Airthings' 2022 consolidated financial statements as of 31 December 2022. The accounting policies adopted in the preparation of the interim consolidated financial statements are consistent with those applied in the preparation of Airthings' consolidated annual financial statements for the year ended 31 December 2022. The Group has not early adopted any standard, interpretation or amendment that has been issued but is not yet effective.

The interim consolidated financial statements have been prepared on a historical cost basis. All figures are presented in United States dollar ('USD') thousands (USD 1,000), except when otherwise stated.

Further, the interim consolidated financial statements are prepared based on the going concern assumption. The macroeconomic environment has proven challenging throughout 2022 and into 2023 with increasing interest rates and inflation causing uncertainty and reduced consumer confidence. Consequently, retailers and distribution partners have reduced inventory coverage to lower their capital burden and reduce risk exposure. The investment climate is also subdued in the B2B segment, Airthings for Business. The Board continues to monitor the situation carefully to ensure appropriate measures are taken as the situation continues to unfold through 2023.

Presentation currency and functional currency

Airthings ASA has Norwegian krone ('NOK') as its functional currency and its subsidiaries have SEK or USD as their functional currencies. The Group presents it's consolidated financial statements in USD to provide the primary users of the financial statements with more convenient information. When converting from NOK to USD large items on the balance sheet, such as Equity and Cash and cash equivalents, may show significant unrealized differences when the exchange rate between these two currencies fluctuates substantially.

Note 3: Significant accounting judgements, estimates and assumptions

The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances. Actual results may differ from these estimates. The estimates and the underlying assumptions are reviewed on an ongoing basis.

In preparing the interim consolidated financial statements, the significant judgments, estimates and assumptions made by management in applying the Group's accounting policies and the key source of estimation uncertainty were the same as those applied to Airthings' annual financial statements for the year ended 31 December 2022.

Note 4: Operating segments

For management purposes, the Group is organized into business areas based on its different markets and has three reportable segments, as follows:

• Consumer private customers
• Business business customers such as schools, office buildings and other commercial buildings
• Professional professional customers such as home inspectors and certified radon professionals

No operating segments have been aggregated to form the above reportable operating segments.

The Board of Directors is the Group's chief operating decision maker and monitors the operating results of its business units separately for the purpose of making decisions about resource allocation and performance assessment. Segment performance is evaluated based on EBITDA measured consistently with operating profit or loss before depreciation and amortization. The Group's financing (including finance costs and finance income), depreciation and amortization and income taxes are managed on a Group basis and are not allocated to operating segments.

Group functions

The remaining of the Group's activities and business are shown in the 'Group functions' column in the tables below. These activities mainly relate to R&D, marketing and administrative functions of the Group.

2Q 2023 (USD 1,000)	Consumer	Business	Professional	Group functions	Consolidated IFRS
REVENUES & PROFIT
External customers	4,970	1,955	532		7,457
Total revenue	4,970	1,955	532		7,457
Cost of goods sold	2,102	655	72		2,830
Employee benefit expenses	434	1,005	85	2,737	4,261
Other operating expenses	1,066	150	69 Group	1,816 Adjustments/ Consolidated	3,100
EBITDA	Consumer 1,368	Business Professional 145	306 functions	-4,553 eliminations	-2,734 IFRS

2Q 2022 (USD 1,000)	Consumer	Business	Professional	Group functions	Consolidated IFRS
REVENUES & PROFIT
External customers	4,375	1,994	483		6,851
Total revenue	4,375	1,994	483		6,851
Cost of goods sold	1,845	932	95		2,872
Employee benefit expenses	498	1,094	92	3,315	4,999
Other operating expenses	752	230	274	3,107	4,363
EBITDA	1,817	-262	23	-6,960	-5.383

YTD 2023 (USD 1,000)	Consumer	Business	Professional	Group functions	Consolidated IFRS
REVENUES & PROFIT
External customers	11,371	3,690	1,147		16,208
Total revenue	11,371	3,690	1,147		16,208
Cost of goods sold	5,370	1,193	153		6,716
Employee benefit expenses	1,055	2,126	160	5,093	8,433
Other operating expenses	2,810	355	207	3,627	6,999
EBITDA	2,137	16	627	-8,720	-5,940

YTD 2022 (USD 1,000)	Consumer	Business	Professional	Group functions	Consolidated IFRS
REVENUES & PROFIT
External customers	10,509	4,234	1,170		15,913
Total revenue	10,509	4,234	1,170		15,913
Cost of goods sold Employee benefit expenses	4,608 991	1,819 2,147	179 170	6,122	6,606 9,431
Other operating expenses	1,564	599	443	6,087	8,692
EBITDA	4,365	-331	378	-12,209	-8,816

2022 (USD 1,000)	Consumer	Business	Professional	Group functions	Consolidated IFRS
REVENUES & PROFIT
External customers	23,037	10,313	2,075		35,424
Total revenue	23,037	10,313	2,075		35,424
Cost of goods sold	9,871	4,254	340		14,465
Employee benefit expenses	2,046	3,934	323	10,351	16,654
Other operating expenses	3,830	1,091	687	10,482	16,090
EBITDA	7,291	1,033	724	-20,833	-11,785

Segmental analysis of assets and liabilities

Assets and liabilities by reporting segment is not included in management reporting and is therefore not disclosed separately within the operating segments.

Geographical disaggregation

Reference is made to note 5 Revenue for information on the Group's geographical markets.

Note 5: Revenue

Airthings Group is a manufacturer of air quality sensors and hardware-enabled software products for air quality, radon measurement and energy efficiency solutions. The Group's revenue from contracts with customers are reported in three main segments as described in note 4: Consumer, Business and Professional.

• The consumer segment sells air quality sensors to private customers through retailers and e-commerce
• The business segment sells air quality solutions to schools, office buildings, and other commercial buildings
• The professional segment sells measurement solutions which enables inspectors and certified radon professionals to accurately measure, analyze and report on buildings. The professional segment also offers rental of products and calibration services

Set out below is the disaggregation of the Group's total revenue:

Revenues (USD 1,000)	2Q 2023	2Q 2022	YTD 2023	YTD 2022	2022
Revenue from contracts with customers	7,350	6,725	15,999	15,668	34,953
Rental income	107	126	209	245	471
Total revenues	7,457	6,851	16,208	15,913	35,424

Set out below is the disaggregation of the Group's revenue from contracts with customers:

Geographical information (USD 1,000)	2Q 2023	2Q 2022	YTD 2023	YTD 2022	2022
EMEA	1,508	2,131	3,360	5,787	10,102
North America (USA and Canada)	5,842	4,594	12,639	5,287	24,851
Total revenue from contracts with customers	7,35	6,725	15,999	15,668	34,953

The information above is based on the location of the customers:

Timing of revenue recognition (USD 1,000)	2Q 2023	2Q 2022	YTD 2023	YTD 2022	2022
Goods transferred at a point in time	6,548	6,189	14,340	14,495	32,527
Subscription and services transferred over time	801	536	1,658	1,173	2,427
Total revenue from contracts with customers	7,350	6,725	15,998	15,668	34,953

Note 6: Other operating expenses

Total operating expenses by function

The table below illustrates the Group's employee benefit expenses and other operating expenses by function. These measures are regularly provided to and reviewed by the Board.

Operating expenses (USD 1,000)	2Q 2023	2Q 2022	YTD 2023	YTD 2022	2022
Sales and marketing	4,588	5,027	9,308	10,231	19,621
Research and development	1,713	2,158	3,608	4,206	7,201
General and administrative	1,414	2,176	2,516	3,686	5,922
Total operating expenses	7,714	9,362	15,432	18,123	32,744
Number of employees	130	143	130	143	137

Note 7: Intangible assets

Depreciation and amortization expenses includes the monthly charge on property, plant and equipment, intangible assets and right-of-use assets over the assets estimated useful lives or lease term. The depreciation and amortization expenses are recognized on a straight-line basis.

Depreciation, amortization and impairment (USDx1,000)	2Q 2023	2Q 2022	YTD 2023	YTD 2022	2022
Depreciation of property, plant and equipment	90	64	157	137	269
Depreciation of right-of-use assets	184	192	375	397	769
Amortization and impairment of intangible assets (see details in the table below)	101	1,647	231	1,744	1,838
Total depreciation, amortization expenses (USD 1,000) and impairment expenses	375	1,903	762	2,278	2,877

Nature of the Group's intangible assets

The Group's intangible assets mainly comprise of software and systems, internal development projects and technology acquired through the acquisition of subsidiaries.

(USD 1,000)	Capitalized development Software costs		& systems Technology	Goodwill 1)	Total
Acquisition cost as of 31 December 2021		1,129	1,864	3,210	6,203
Additions*	890	79			968
Currency translation effects	-74	-134	-216	-369	-763
Acquisition cost as of 30 June 2022	816	1,074	1,648	2,841	6,379
Acquisition cost as of 31 December 2022	1,148	1,171	2,383	2,872	7,574
Additions*	826				826
Currency translation effects	-109	-99	-202	-244	-655
Acquisition cost as of 30 June 2023	1,865	1,072	2,181	2,628	7,745
Accumulated amortization as of 31 December 2021		282	217		499
Amortization charge for the period		153	69		222
Impairment charge for the period			1,522		1,522
Currency translation effects		-41	-159		-200
Accumulated amortization as of 30 June 2022		394	1,648		2,042
Accumulated amortization as of 31 December 2022		554	1,690		2,244
Amortization charge for the period Impairment charge for the period		163	68		231
Currency translation effects		-52	-146		-198
Accumulated amortization as of 30 June 2023		665	1,612		2,277
Net book value:
As of 30 June 2022	816	679	0	2,841	4,337
As of 31 December 2022	1,148	617	693	2,872	5,330
As of 30 June 2023	1,865	407	569	2,628	5,459
Economic life (years)	5	5	5	Indefinite
Depreciation plan			Straight-line

* Development expenditures

1) Goodwill

Airthings performed its annual impairment test for goodwill in December 2022 and no impairments were made. The impairment test for goodwill is based on value-in-use calculations. The key assumptions used to determine the recoverable amount is disclosed in Airthings' consolidated financial statements for the year ended 31 December 2022.

Airthings considers the relationship between our market capitalization and our book value, among other factors, when reviewing for indicators of impairment. In addition, the group considers factors such as revenue growth in the industry, impact of general economic conditions, changes in the technological environment, the group's market share, and performance compared to previous forecasts in this assessment.

No changes to AfB's long-term prospects are expected due to the recent macro development, hence no impairment of the goodwill is made. Management does not see any other reasonable changes in the key assumptions that would cause the value in use to be lower than its carrying value.

Note 8: Income tax

The consolidated tax rate for the Group are approximately 22%. The Group's operations are subject to income tax in various foreign jurisdictions. The statutory income tax rates vary from 20.6% to 22%, which results in a difference between the statutory income tax rate in Norway and the average tax rate applicable to the Group. The effect from the statutory income tax rates from other countries (Sweden and USA) on the Group tax rate is very limited as the main operations are in Norway.

Deferred tax assets are recognized for unused tax losses to the extent that it is probable that taxable profit will be available against which the losses can be utilized. Tax losses carried forward in the parent company have been fully recognized as deferred tax assets in the consolidated financial statements, as the Group consider it to be probable that these taxable losses may be utilized in the future. Reference is made to note 2.8 in the Group's consolidated financial statements for the year ended 31 December 2022 for more information.

Note 9: Revolving credit facility

In 1Q 2023 Airthings secured a USD 8 million revolving credit facility (RCF) with Danske Bank. As of 31 March 2023, USD 0 million of the facility was utilized. The RCF need to be renewed after 12 months. When the facility is is utilized, it will be classified as short-term interest-bearing debt in the financial statements.

Covenants:

1. Borrowing base: Utilized facility < 30% of inventory and 50% of trade receivables excl. trade receivables more than 60 days due

2. Clean-down: Minimum 1 period of 5 working days between 24 June 2023 and 23 January 2024

Covenants will be measured and monitored quarterly. Airthings was compliant with all covenants as of 30 June 2023

Note 10: Grants and growth loan from Innovation Norway

In May 2023, Airthings secured funding from Innovation Norway linked to the companies R&D activities with final reporting 31 March 2025. A maximum grant of 17 MNOK and a growth loan of maximum 24 MNOK were awarded to the company. The company received 5 MNOK of the grant and 14 MNOK of the growth loan in a first installment of the funding this quarter and this is reflected in the balance sheet.

Covenants related to the Innovation Norway funding (with effect from 30 June 2023):

• 1. Equity ratio: Equity ratio > 35%
• 1. Working capital: Working capital > 50 000 000 NOK

Covenants will be measured and monitored quarterly. Airthings was compliant with all covenants as of 30 June 2023

Note 11: Share capital and shareholders information

Issued capital and reserves:

Share capital in Airthings ASA	Number of shares authorized and fully paid	Par value per share (NOK)	Financial Position (USD 1,000)
At 31 December 2021	171,816,437	0.01	190
Share capital increase - February 2022	550,400	0.01	1
Share capital increase - May 2022	482,200	0.01	1
At 31 March 2022	172,849,037	0.01	191
Share capital increase - July 2022	160,109	0.01	0
Share capital increase - November 2022	983,200	0.01	1
At 31 December 2022	173,992,346	0.01	192
Share capital increase - February 2023	23,437,500*	0.01	23
At 30 June 2023	197,429,846	0.01	215

* Airthings raised NOK 75 million in gross proceeds through a private placement of 23,437,500 shares in the quarter.

All shares are ordinary and have the same voting rights and rights to dividends. Reconciliation of the Group's equity is presented in the statement of changes in equity.

No distributions were made to shareholders in the current or prior period. Further, there are no proposed dividends.

Share price information

Share 30 June, 2023 (NOK) 2,31 Market capitalization 30 June, 2023 (NOKm) 455

The Group's shareholders:

Shareholders in Airthings ASA at 30 June 2023	Total shares	Ownership/Voting rights
Firda AS	56,113,289	28%
Victoria India Fund AS	5,901,881	3%
Rabakken Invest AS	5,800,364	3%
Atlas Invest AS	5,637,468	3%
Halvor Wøien	4,894,522	2%
Erlend Peter Johnsen Bolle	4,819,722	2%
Verdipapirfondet KLP AksjeNorge	4,462,222	2%
Koki Yoshioka	4,166,650	2%
Brownske Bevegelser AS	3,500,000	2%
The Bank Of New York Mellon SA/NV	3,500,000	2%
A Management AS	3,123,228	2%
Danske Invest Norge Vekst	2,962,962	2%
Skilling Systemer AS	2,900,000	1%
Bjørn Magne Sundal	2,852,000	1%
Møsbu AS	2,814,236	1%
Longfellow Invest AS	2,753,534	1%
Nore-Invest AS	2,450,659	1%
Grotmol Solutions AS	2,434,403	1%
Storlien Invest AS	2,432,000	1%
Nygon AS	1,751,969	1%
Other	72,158,737	39%
Total	197,429,846	100%

Shareholders in Airthings ASA at 31 December 2022	Total shares	Ownership/Voting rights
Firda AS	34,780,124	20%
Verdipapirfondet KLP AksjeNorge	7,962,222	5%
Rabakken Invest AS	5,800,364	3%
Atlas Invest AS	5,637,468	3%
Halvor Wøien	4,894,522	3%
Erlend Peter Johnsen Bolle	4,819,722	3%
Victoria India Fund AS	4,558,131	3%
Koki Yoshioka	4,166,650	2%
TIN World Tech	3,025,292	2%
Brownske Bevegelser AS	3,000,000	2%
Danske Invest Norge Vekst	2,962,962	2%
Bjørn Magne Sundal	2,900,000	2%
Skilling Systemer AS	2,900,000	2%
Møsbu AS	2,814,236	2%
Longfellow Invest AS	2,753,534	2%
Nore-Invest AS	2,450,659	1%
Grotmol Solutions AS	2,434,403	1%
Storlien Invest AS	2,432,000	1%
Verdipapirfondet Storebrand Norge	1,894,800	1%
Centra Invest AS	1,851,851	1%
Other	69,953,406	40%
Total	173,992,346	100%

The Group's shareholders:

Note 12: Earnings per share

(Profit or loss in USD)	2Q 2023	2Q 2022	YTD 2023	YTD 2022	2022
Profit or loss attributable to ordinary equity holders - for basic EPS	-2,212,298	-4,450,725	-4,293,413	-7,581,919	-10,565,598
Profit or loss attributable to ordinary equity holders adjusted for the effect of dilution*	-2,212,298	-4,450,725	-4,293,413	-7,581,919	-10,565,598
Weighted average number of ordinary shares - for basic EPS	197,429,846	172,634,726	191,830,888	172,363,181	172,826,775
Weighted average number of ordinary shares adjusted for the effect of dilution	199,489,621	177,280,890	194,095,521	178,260,684	177,577,976
Basic EPS - profit or loss attributable to equity holders of the parent	-0.01	-0.03	-0.02	-0.04	-0.06
DilutedEPS - profit orloss attributable*	-0.01	-0.03	-0.02	-0.04	-0.06

*The ordinary shares are not adjusted for the effect of dilution as the effect of including the additional shares is antidilutive.

Note 13: Share-based payments

Employees (including members of the Board and management) of the Group receive remuneration in the form of share-based payment, whereby employees render services as consideration for equity instruments (equity-settled transactions). As at 30 June 2023, the Group had 8,621,239 outstanding options with a weighted average strike price of NOK 2.48 Reference is made to note 6.6 of Airthings' 2022 consolidated financial statements for a description of the Group' share option plans.

During 2Q 2023, 240,742 share options were granted to employees under the Group's share option plan from 2021. The fair value of the options granted during the three months ended 30 June 2023 was estimated on the date of grant using the following assumptions:

Weighted average fair values at the measurement date (NOK)	0.91
Dividend yield (%)	0.00%
Expected volatility (%)	43.90%
Risk–free interest rate (%)	3.29%
Expected life of share options (years)	2.50
Weighted average share price (NOK)	2.95
Weighted average exercise price (NOK)	2.84
Model used	BSM

YTD 2023, the Group has recognized USD 217 thousands of share-based payment expense in the statement of profit or loss (YTD 2022: USD 218 thousands).

As of 30 June 2023, the Group has recognized a social security provision for share-based payment of USD 74 thousands (30 June 2022: USD 183 thousands).

Note 14: Other factors and significant events

Reference is made to note 6.3 of Airthings' 2022 consolidated financial statements. The key risk areas are discussed below:

Liquidity risk - represents the risk that the Group may potentially encounter difficulties in meeting obligations associated with financial liabilities that are settled by provision of cash or another financial asset. The Group supervises its risk by monitoring its working capital, and overdue trade receivables. The Group's cash position has weakened since 2021. To improve the cash situation the group has intensified its focus on optimizing business operations and reducing inventories. This effort includes promotional activities to increase sales and cost initiatives.

To further improve the its liquidity position, the Group entered into a USD 8 million revolving credit facility with Danske Bank in 1Q 2023, see note 9. The Group also raised NOK 75 million in gross proceeds through a private placement of 23,437,500 shares in the prior quarter. In addition, the Group has secured funding from Innovation Norway in the form of a grant NOK 17 million and a loan of NOK 24 million. NOK 5.1 million of the grant and NOK 14 million of the loan were paid out to the Group in the second quarter. The liquidity risk is hence considered to be at a reasonable level.

War in Ukraine - the ongoing war does not currently impact the Group directly, as it has no operating presence in either Russia, Belarus or Ukraine. Indirect effects however, such as financial market volatility, sanctionsrelated knock-on effects, general economic market conditions and other future responses of international governments, might have an impact on the Group's financial results and financial position. The Group's management continues to monitor the situation and has an ongoing assessment of potential impact on the Group's financial results and financial position.

Climate risk - the impact of climate risks has been taken into account in the preparation of the Group's interim consolidated financial statements for the period ended 30 June 2023. However, the risks identified are not considered to have a significant impact on the Group considering the nature of the its operations. Potential impacts of climate change are continuously considered in assessing whether assets may be impaired. As of 30 June, 2023 there is no impact on the Group's assets or liabilities.

Note 15: Events after the reporting period

Adjusting events

There have been no significant adjusting events subsequent to the reporting date.

Non-adjusting events

There have been no significant non-adjusting events subsequent to the reporting date.

Alternative performance measures

This section includes information about alternative performance measures (APMs) applied by the Group.

These alternative performance measures are presented to improve the ability of stakeholders to evaluate the Group's operating performance. The Group applies the following APMs.

Annual recurring revenue (ARR)

ARR is the value of annualized sales from all active subscriptions, licenses and service contracts within the Airthings for Business and Professional segments. The calculation is based on monthly subscription fees for the ending period (MRR), multiplied by 12 in order to represent an annualized figure. The numbers presented in the table below are translated from NOK to USD applying the average NOK/USD exchange rate for YTD 2023 and YTD 2022 respectively. ARR is considered an important supplemental measure for stakeholders to get an overall understanding of revenue generation within the Group's operating activities.

(USD 1,000)	2Q 2023	2Q 2022	2022
MRR	334	267	300
ARR	4,012	3,202	3,602

EBITDA

The Group's earnings before interest, tax, depreciation and amortization (EBITDA) is used to provide consistent information on Airthings' operating performance relative to other companies, and is frequently used by analysts, investors and other stakeholders when evaluating the financial performance of the Group. EBITDA, as defined by Airthings, includes total operating revenue and excludes depreciation, amortization and impairment loss. For a reconciliation of EBITDA, refer to the consolidated statement of profit or loss.

EBITDA (USD 1,000)	2Q 2023	2Q 2022	YTD 2023	YTD 2022	2022
Revenue	7,457	6,851	16,208	15,913	35,424
EBITDA	-2,734	-5,383	-5,940	-8,816	-11,785
EBITDA margin	-37%	-79%	-37%	-55%	-33%

Gross profit margin

Gross profit margin is defined as revenue less cost of goods sold as a percentage of total revenue. Management believes that this measure is important for the users of the financial statements to determine the profitability and the financial performance of the Group.

Gross profit margin (USD 1,000)	2Q 2023	2Q 2022	YTD 2023	YTD 2022	2022
Revenue	7,457	6,851	16,208	15,913	35,424
Cost of goods sold	2,830	2,872	6,716	6,606	14,465
Gross profit	4,627	3,979	9,492	9,306	20,959
Gross profit margin	62%	58%	59%	58%	59%

Forward-looking statements

Forward-looking statements presented in this report are based on various assumptions. The assumptions were reasonable when made but are inherently subject to uncertainties and contingencies that are difficult or impossible to predict. Airthings ASA cannot give assurances that expectations regarding the outlook will be achieved or accomplished.

Statement of the Board of Directors and CEO

We hereby confirm that, to the best of our knowledge, that the interim financial statements for the period from 1 January, 2023 to 30 June, 2023, have been prepared in accordance with IAS 34 Interim Financial Statements, and that the information in the financial statements gives a true and fair view of the group's assets, liabilities, financial position and profit or loss taken as a whole. We also confirm that, to the best of our knowledge, the interim report for the full year gives a true and fair view of important events in the accounting period and their influence on the interim report for the first half 2023.

Oslo, 13 July 2023

Geir Førre Chairman of the Board

Emma Tryti Board member

Karin Berg Board member

Liv Dyrnes Board Member

Niklas Norin Board member

Øyvind Birkenes CEO

Aksel Lund Svindal Board member

Chloe Waller Board member

Breathe better. Live better.