Airthings — Interim / Quarterly Report 2024

Aug 21, 2024

August 21st, 2024 Emma Tryti, CEO Magnus Bekkelund, Interim CFO

Q2 highlights Q2 revenues of

Consumer segment: Revenues of USD 6.8m, up 37% y-o-y driven by strong underlying demand across all channels. Particularly strong growth in North America.

89% YoY growth in airthings.com, with direct sales channel accounting for nearly 20% of consumer revenues in the quarter.

Gross margin stable at 62% despite significantly higher share of revenues from the Consumer segment.

USD 8.7M

up 17 percent YoY, driven by strong underlying consumer demand. Continued challenging market conditions in the Business segment.

Q2 gross profit of USD 5.4M

up 18 percent from USD 4.6 million in Q2 23, with stable gross margin despite changes in segment mix.

GROUP REVENUES (USD M)

ANNUAL RECURRING REVENUE (USD M)

Q2 total ARR of USD 4.3M

up 7 percent YoY supported by increased software sales and low churn in the Business segment.

Progressing on our path to profitability

LTM development since Q2 23 EBITDA margin +14%-points Revenue growth +8% Gross margin expansion +3%-points OPEX to revenues –10%-points

Consumer revenues +37% y-o-y

Consumer segment Q2 update

Consumer Sales Revenues (USD M)

Positive developments in seasonally slow quarter

• 89% growth in the direct sales channel Airthings.com, accounting for nearly 20% of Consumer sales in the quarter.
• Continued solid partnerships with Amazon, Home Depot and other retailers.
• Strong growth in North America; Canada up 40%.

Consumer device registrations +12% y-o-y

Consumer segment Q2 update Consumer device registrations

(Indexed – Q1 20 = 100)

Strengthened customer loyalty

• New device registrations for connected products rose 12% y-o-y, up from a high level in Q2 23 following extensive promotional activities last year.
• Repeat sales accounted for 26% of total sales, indicating customer satisfaction and loyalty.
• View Plus continued to be the most popular second purchase.

Business segment revenues down 30% y-o-y in slow quarter

No major shipments

• Growing pipeline of large projects, although revenues significantly hampered by longer sales cycles in a challenging commercial real estate market.
• Promising outlook in US school market:
  • Secured an order for IAQ sensors in 1,500 classrooms across 5+ schools districts including Beverly Hills USD and Huntington Beach USD.
  • Finalist in tender process ended with no bid awarded.
• Solid new references in EMEA including Radisson Blu, Telenor and a major Norwegian financial institution via our partners Energy Control and Sony Network Communications.

Considerable growth in Device deployment

Business segment Q2 update

Number of Devices in the field: +31%

• Good progress installing inventory sold to multiple partners in 2023 (indicating a lag between sell in and sell through).
• Reaching >23,000 monitors deployed at our largest client (Fortune 100) over the last nine months across their offices globally.

Steady sales at modest levels in Pro

Pro Segment Q2 update

Sales +3% at USD 0.5m

• Mainly sales to radon professionals in the US market.

ARR +7% y-o-y, driven by the Business segment

Annual Recurring Revenue Q2 update

Annual Recurring Revenue (USD M)

ARR +7% y-o-y

• ARR from the Business segment +11% to USD 3.2 million.
• Driven by large installations at major enterprise customer.
• Negligible churn.

Financials Magnus Bekkelund, interim CFO

17% revenue increase with stable gross margin

Income statement

• Revenues of USD 8.7M in Q2 24, up 17% y-o-y.
• Gross margin of 62%, stable despite larger share of revenues from the Consumer segment .
• EBITDA-loss of USD 1.7M at -19% EBITDA-margin, compared to -37% in Q2 24
  • OPEX/Sales 81% vs 99% in Q2 23 .
• EBIT-loss of USD 2.2M
  • Reduced by USD 0.9M.

(USD 1 000)	Q2 24	Q2 23	H1 24	H1 23
Total revenue	8 733	7 457	18 244	16 208
Cost of goods sold	3 287	2 830	7 042	6 716
Gross profit	5 445	4 627	11 202	9 492
Sales Gross Margin	62%	62%	61%	59%
Employee benefit expenses	3 823	4 261	7 466	8 433
Other operating expenses	3 285	3 100	7 241	6 999
EBITDA	-1 663	-2 734	-3 506	-5 940
Depreciation and amortization	577	375	954	762
Impairment	0	0	0	0
Operating profit / EBIT	-2 241	-3 109	-4 460	-6 703
Financial income / (expenses)	-280	285	919	1 273
Profit (loss) before tax	-2 521	-2 825	-3 541	-5 429
Income tax	-461	-612	-683	-1 136
Net profit (loss)	-2 060	-2 212	-2 858	-4 293
Earnings per share (USD)
Basic earnings per share	-0.01	-0.01	-0.01	-0.02
Diluted earnings per share	-0.01	-0.01	-0.01	-0.02

Stable gross margin despite changes in segment mix

Income statement

	Consolidated income statement (USD 1,000)	Q2 23	Q3 23	Q4 23	Q1 24	Q2 24
	Consumer
	Total revenues	4,971	6,399	7,004	7,786	6,808
	Cost of goods sold	2,102	2,616	2,749	3,383	2,857
	Gross profit	2,868	3,783	4,255	4,403	3,951
	Sales Gross Margin	58 %	59 %	61 %	57 %	58 %
	Business
	Total revenues	1,955	3,117	2,866	1,151	1,378
	Cost of goods sold	655	1,086	962	301	369
	Gross profit	1,300	2,031	1,904	850	1,010
	Sales Gross Margin	66 %	65 %	66 %	74 %	73 %
	Professionals
	Total revenues	532	566	432	574	546
Professionals	Cost of goods sold	72	122	50	71	62
Business	Gross profit	460	444	382	503	484
Total	Sales Gross Margin	86 %	79 %	88 %	88 %	89 %
Consumer	Total revenues	7,458	10,082	10,302	9,511	8,733
	Gross profit	4,628	6,258	6,540	5,756	5,445
0	Sales Gross Margin	62 %	62 %	63 %	61 %	62 %

Continuing work to reduce inventories

Average days of inventory down 13% from Q2 23

• Total inventories reduced to USD 14M, down USD 2.1M from Q2 23
  • Ramped-up production in Q2 for deliveries in Q3
• Decline in average days of inventory from 399 to 346.
• Aim to reduce inventory to 250 days at year end
  • Assuming no major currency effects to boost value of inventory

Limited changes to balance sheet year over year

	(USD 1 000)	30.06.2024	30.06.2023
• Change in assets	Goodwill	2 659	2 628
	Intangible assets	3 739	2 840
• Deferred tax asset	Deferred tax assets	9 233	7 665
• Inventories	Property, plant and equipment	511	729
• Trade receivables	Right-of-use assets	2 022	2 740
	Other non-current assets	95	82
• Cash	Total non-current assets	18 259	16 684
	Inventories	14 048	16 168
• Change in liabilities	Trade receivables	9 015	8 152
• Limited changes	Other receivables	5 763	4 662
	Cash and cash equivalents	11 212	17 380
	Total current assets	40 039	46 363
• Equity ratio	Total assets	58 297	63 047
	Total equity	45 245	49 326
	Non-current interest-bearing liabilities	1 315	1 300
	Non-current lease liabilities	1 437	2 156
	Other non-current liabilities	99	72
	Total non-current liabilities	2 851	3 529
	Current lease liabilities	821	837
	Trade and other payables	5 946	5 611
	Contract liabilities	1 731	1 196
	Income tax payable	6	32
	Other current liabilities	1 698	2 416
	Total current liabilities	10 201	10 192
	Total equity and liabilities	58 297	63 047

Moderate cash burn in Q2 and 1H 24

(USD 1,000

• Negative cash flow from operating activities of USD 1.5M
  • Loss offset by financial items and depreciation and amortization.

• Cash flow from investment activities of USD -0.3M

• Development expenditures, PPE and interest received .
• Cash flow from financing activities of USD -0.2M

• Lease liabilities

• Cash balance of USD 11.2M and total available liquidity of USD 17.2M including the revolving credit facility of USD 6.0M with Danske Bank.

Strategy review 1

Findings from strategy review 2

Market insight 3

Opposite development in our two main segments

• Demand from the Consumer segment stronger than expected
• Growth across all sales channels and regions
• Increasing levels of repeat purchases

Consumer segment stronger than expected ... while development in Business segment is still volatile

High revenue volatility due to the following reasons:

• Difficult market conditions in the Commercial Real Estate sector
• Depletion of inventory purchased in 2023 by key partners
• Challenges in replicating the growth achieved with a major client in 2022 and 2023

Market development and new insights triggered strategy review

H1 2024 New management and strategy review

Need to accelerate path to profitability

Focus on core activities to capitalize on higher-thanexpected consumer demand

H2 2024 Strategic initiatives identified

New strategic initiatives identified – execution to begin Q3 24

Findings from strategy review

Insight #1: Best market fit with health driven Indoor Air Quality (IAQ)

Airthings for people: value proposition relevant for both the Consumer and Business segments

Insight #2: Accelerating consumer demand, driven by health awareness

Insight #3: In the Business segment, schools and large enterprises represent the highest ROI

Business Segments

	Schools and public buildings	Large enterprises		Other
Examples of current end customers	Ivy league universities California schools Municipalities in Norway	Multiple Fortune 500 companies in the US Several European based global enterprise customers	Hotels Retail Senior living	Prisons Museums Warehouses	Hospitals Gyms Restaurants
Device density	Higher		Lower
Win rate	Higher		Lower
Avg. deal size	Higher		Lower
LTV/CAC	Higher		Lower

Airthings empowers people to breathe better

People are increasingly aware of their personal health, and IAQ is an important part of it. They take their care for their health and are aware of IAQ wherever they go.

As a part of people's lives, we provide you Airthings

Market insight: Indoor Air Quality, a growing part of the health tech market

Fast-growing market for health tech products and solutions

Our three main entry points to Indoor Air Quality (IAQ)

Well-positioned to capture significant share of the IAQ market

From "nice to have" to "must have"

Significant growth potential due to changing perceptions and increasing demand for better indoor air quality

Capitalizing on safety product-market fit (radon and particulate monitors) to increase demand among wellness and performance enthusiasts

We expect indoor air quality to be seen as a basic need

In the future…

New strategic initiatives

Strategic initiatives to capitalize on IAQ awareness and reduce complexity

Value proposition 3

Invest in one, united value proposition: Indoor air quality solutions to people at home, school and work

Sell direct and through strategic partners enhancing our distribution power

Enable trusted partners to sell and grow building control to businesses

Sell exclusively through value added partners

Reduce complexity through a leaner operating model and organization

Investing in one, united value proposition

Focus on IAQ monitoring in the Business segment; building control to be provided by partners

Reduce complexity through leaner operating model and organization

1 2 3

Path to profitability

Revenue growth: Capitalize on accelerating demand for Health IAQ

Reduced costs: 20% workforce reduction in the second half of 2024

Profitability: Positive EBITDA for the second half of 2025 and full year 2026

Airthings empowers people to breathe better

People are increasingly aware of their personal health, and IAQ is an important part of it. They take their care for their health and are aware of IAQ wherever they go.

As a part of people's lives, we provide you Airthings

Expecting positive EBITDA for 2H 2025 and for full year 2026

Strategic initiatives will shorten path to probability Q3 is characterized by major high velocity events

• Solid quarter, two-folded outcome on segment level
• 37% growth in the Consumer segment, driven by strong growth across all channels
• Continued challenging market conditions in the business segment
• Strategic initiatives to capitalize on underlying demand and reduce complexity are identified and will be implemented:
  • One, united value proposition
  • Partnerships
  • Leaner and more focused organization

• Expecting positive EBITDA for 2H 2025 and for full year 2026

• Q3 is characterized by major high velocity events such as Prime Day and Fire Safety Event in collaboration with Amazon and Home Depot in the United States. Additionally, the need for air quality control typically increases with the forecasted surge of wildfires in the quarter

• We will launch Wave Enhance, a monitor perfect for bedrooms and home offices where restful sleep and the ability to focus are essential

Guidance (USD M)	Q3 2024
Revenue	9.5 – 11.5
Annual Recurring Revenue	4.3 – 4.5

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This presentation does not constitute an offering of securities or otherwise constitute an invitation or inducement to any person to underwrite, subscribe for or otherwise acquire securities in Airthings ASA (The Company). The release, publication or distribution of this presentation in certain jurisdictions may be restricted by law, and therefore persons in such jurisdictions into which this presentation is released, published or distributed should inform themselves about, and observe, such restrictions.

This presentation includes and is based, inter alia, on forward-looking information and contains statements regarding the future in connection with The Company's growth initiatives, profit figures, outlook, strategies and objectives. All forward-looking information and statements in this presentation are based on current expectations, estimates and projections about global economic conditions, the economic conditions of the regions and industries that are major markets for The Company. These expectations, estimates and projections are generally identifiable by statements containing words such as "expects", "believes", "estimates" or similar expressions.

Important factors may lead to actual profits, results and developments deviating substantially from what has been expressed or implied in such statements. Although The Company believes that its expectations and the presentation are based upon reasonable assumptions, it can give no assurance that those expectations will be achieved or that the actual results will be as set out in the presentation.

The Company is making no representation or warranty, expressed or implied, as to the accuracy, reliability or completeness of the presentation, and neither The Company nor any of its directors, officers or employees will have any liability to you or any other persons resulting from your use.

This presentation was prepared in connection with the Q2 results released on August 21st, 2024. Information contained herein will not be updated. The following slides should also be read and considered in connection with the information given orally during the presentation.