Airthings — Investor Presentation 2022

Jul 14, 2022

July 14, 2022

Oyvind Birkenes, CEO Jeremy Gerst, CFO

2Q22 Presentation

Disclaimer

The following presentation is being made only to, and is only directed at, persons to whom such presentation may lawfully be communicated ("relevant persons"). Any person who is not a relevant person should not act or rely on this presentation or any of its contents.

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 2Q results released on July 14th, 2022. 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.

Empower the world to breathe better

High-growth and expanding business

Challenging second quarter

• Sales revenue of USD 6.9M, down 10% YoY
• Retailers and channel partners in the Consumer segment have significantly reduced their inventory during the quarter
• Despite 34% growth in Consumer device registrations
• Gross profit margin of 61%* , up 2%-points up from 1Q22
• * Excl. inventory impairment of Airtight (USD 0.2M)
• 3Q22 revenue guidance of USD ⁷– 11M

2Q Highlights

30%+ growth in Consumer device registrations

72% YoY growth in Airthings for Business

Nordre Follo municipality buys 1,000+ monitors selecting Airthings as an IoT partner with ATEA following a thorough tender process

Challenging Consumer market with channel and retail partners reducing inventories of consumer electronics in second quarter

Signed major new partners for Airthings for Business

Strengthened geographical footprint within the consumer segment

Airthings is disrupting the building automation market by directly controlling the HVAC system of more and more buildings – improving air quality and energy efficiency

Optimizing cost base and working capital to accelerate the path to profitability

Strong growth in Consumer device registrations

• New devices are registered when linked to an Airthings app
• Proxy for true end-user demand
• Growth over 34% in 2Q 2022 vs. 2Q 2021

Rapidly expanding devices in the field

• Devices in the field grew by 198% in 2Q 2022 vs. 2Q 2021, and up 26% vs. 1Q 2022
• The surge in devices in the field in 1Q22 is attributable to the Quebec school contract
• Driver of underlying growth in ARR

Heightened inventory levels

• Significant amounts of cash dedicated to working capital with average Days of Inventory at 401 days in 2Q 2022
• Most of the inventory is finished goods, but also some key components
• Build-up was a strategic decision over the course of 2021 to mitigate effect of global component shortage
• Focus area going forward to return Days of Inventory to more normal levels
• Significant opportunities to achieve working capital improvements

Note: Days of Inventory calculation – Inventories / (4 quarter rolling average COGS) * 90 days in quarter

Road to profitability

• Focus on revenue growth
• Including increased focused on R&D projects with most certain expected ROI
• Range of additional actions taken over the course of 2Q22, including:
• Transition of resources to high potential areas, Consumer and Airthings for Business
• Implementation of cost savings
• Temporary hiring freeze with some exceptions
• About 10% reduction in overall headcount

Update by Segment

Consumer

For everyone with a home

Business

For commercial & public buildings

Pro

For home inspectors & radon professionals

Consumer Segment 2Q Update

• Revenue of USD 4.4M, down 19% YoY
• Gross Profit Margin was 58.0% in 2Q, up 3% points from 1Q22
• Channel and retail partners reducing inventories of consumer electronics in quarter
• Device registrations shows underlying growth
• Further strengthening of geographical retail footprint and expansion with existing partners
• Global uncertainties continuing to affect market visibility

Business Segment 2Q Update

• Sales revenue of USD 2.0M, with 72% YoY growth
• 63%* Gross Profit Margin
• * Excl. inventory impairment of Airtight (USD 0.2M)
• Increasing share of business
• From ~15% in 2Q21 to ~29% in 2Q22
• Strong underlying growth from a broad range of partners
• Restructuring efforts of the AfB commercial team in the US already showing positive results

40%

of global energy consumption comes from buildings

4/5 of today's buildings will still exist in 2050

Airthings for Business Saving the environment and costs

"500 Air Quality Monitors from Airthings is controlling the HVAC of a 20-year old building"

\$23k savings in Energy per year

210 hours/year reduction in manual work by automating morning startup logic

165ppm reduction in CO2 level per classroom

Pro Segment 2Q Update

• Sales revenue of USD 0.5M, representing decline of 52% YoY
• Challenging home inspector market, leading to slow sales in the segment
• 80% Gross Profit Margin down from 88% in 1Q22

Annual Recurring Revenue (ARR)

• ARR of USD 3.2M, up 64% YoY
• A modest decline in Pro's ARR (USD 0.1M), resulted in overall ARR coming in somewhat below original guidance of USD 3.3-3.7M for 2Q
• >80% gross profits from ARR
• 3Q22 ARR guidance of USD 3.3 – 3.7M, mainly driven by continued new sales in Airthings for Business

Note: Note: ARR equals annualized sales from all active subscriptions, licenses and service contracts within AfB and Pro. (i.e. subscription service revenues booked in June multiplied by 12)

Brand awareness

• Coverage in leading publications around the world
• Release of new EEA report indicating that pollutants cause 10%+ of all cancer cases in Europe
• Participation in high exposure events
• 0.9 million Unique Web Visitors in 2Q22, up 137% year-on-year

Financials Jeremy Gerst, CFO

Income Statement

Sales revenue of USD 6.9M, down 10% YoY

Sales gross margin at 58% for 2Q

• Absent inventory impairments of Airtight, gross margin of 61%

EBITDA of USD -5.4M

• Number of one-off costs in the quarter (detailed on next slide)

EBIT of USD -7.3M

• Impairment: a derecognition of Airtight technology

(USD'000)	2Q22	2Q21	YTD 2022	YTD 2021
Total revenue	6 851	7 631	15 913	14 038
Cost of sales	2 872	2 674	6 606	5 270
Gross profit	3 979	4 957	9 307	8 768
Sales Gross Margin	58%	65%	58%	62%
Payroll expenses	4 999	3 723	9 431	7 053
Other operating expenses	4 363	3 092	8 692	6 217
EBITDA	-5 383	-1 857	-8 816	-4 502
Depreciation and amortization	381	332	756	623
Impairment	1 522	0	1 522	0
Operating profit / EBIT	-7 285	-2 189	-11 094	-5 125
Financial income / (expenses)	1 529	108	1 241	-62
Profit (loss) before tax	-5 756	-2 082	-9 853	-5 187
Income tax	-1 306	45	-2 271	239
Net profit (loss)	-4 451	-2 127	-7 582	-5 426
Earnings per share (USD)
Basic earnings per share	-0.03	-0.01	-0.04	-0.03

Diluted earnings per share -0.03 -0.01 -0.04 -0.03

Number of one-off costs in the quarter

Write-down of Airtight solution

• USD 0.23 million in COGS costs associated with inventory impairment

Transition to main stock exchange

• USD 0.31 million in OPEX costs associated with move from EuroNext to Oslo Børs

Restructuring costs

• USD 0.64 million in OPEX accruals taken for restructuring related costs

Other

• USD 0.35 million in various other OPEX costs and accruals including a write-down of bad debt

Balance Sheet

Change in assets

• Deferred tax asset
• Inventory increase due to strategic decision to secure supply
• Trade receivables
• Cash due to profitability, working capital, and exchange rates

Change in liabilities

• Significant portion of equity decline due to exchange rate between NOK and USD
• Decline in long -term liabilities
• Accounts payable up
• Other current liabilities change mainly due to accrued subscription revenues and accrued expenses

(USD'000)	30.06.2022	30.06.2021
Assets
Intangible assets	1 495	2 260
Goodwill	2 841	3 307
Property, plant and equipment	916	758
Right -of-use assets	3 488	4 499
Deferred tax assets	6 065	2 661
Other non -current assets	190	897
Total non -current assets	14 995	14 383
Inventories	16 413	6 618
Trade receivables	9 225	7 229
Other receivables	2 939	2 414
Cash and cash equivalents	23 170	54 003
Total current assets	51 746	70 264
Total assets	66 742	84 647
Total equity	53 350	71 385
Non -current lease liabilities	2 874	4 067
Deferred tax liabilities	-	324
Non -current provisions	183	822
Total non -current liabilities	3 058	5 214
Lease liabilities	853	618
Trade and other payables	6 281	4 806
Contract liabilities	971	1 084
Income tax payable	9	17
Provisions	2 222	1 524
Total current liabilities	10 334	8 048
Total equity and liabilities	66 742	84 647

Cash Flow Statement

Cash flow from operating activities USD -7.3M

• Operating loss
• Net working capital due to increase in inventories

Cash flow from investment activities of USD -0.6M

• Internally generated intangible assets, purchase of software, production tooling and office equipment

Cash flow from financing activities of USD -0.2M

Net unrealized foreign exchange difference of USD -4.4M

Summary and outlook

Summary

• Revenue of USD 6.9M, down 10% year-on-year
• Headwinds to Consumer segment with retailers and channel partners significantly reducing their overall inventories in the quarter
• Gross Profit Margin of 61% excluding the inventory impairment of Airtight
• Strong momentum for Airthings for Business with new partners and 72% YoY growth in the quarter
• Grow revenues while optimizing cost base and focusing on working capital to accelerate path to profitability

3Q22 Outlook

• 3Q22 revenue estimated at USD 7.0 11.0M
• ARR expected to grow to USD 3.3 3.7M during the third quarter

Guidance 3Q22

Revenue and ARR guidance (USD M)	2Q22
Revenue	7.0 – 11.0
Annual Recurring Revenue	3.3 – 3.7

Exciting long-term outlook

Global leader in indoor air quality for homes and businesses

Consumer Segment

• Great products
• Increased awareness
• Leading brand in the segment
• Continuous channel expansion, market penetration and scaling

Goal of >USD 60M revenue by 2024

Business Segment

• Continue growth from a broad range of customers
• Improve margins by growing ARR
• Continue proven partnership model with regional and global players

Goal of >USD 40M revenue by 2024

Goal of >USD 20M ARR by 2024

2024 Goal

Revenue of USD 100M+*

* IFRS

ARR of USD 20M+

Long-term EBITDA margin target >25%

Supported by lasting factors and megatrends

Consumer Segment

• Health tech Smart home
• We spend 90% of our time indoors, where the air is 2 to 5 times worse than outside
• Radon is the leading cause for lung cancer among those that do not smoke
• The EU is estimating that 350,000 premature deaths are caused by fine particulate matter annually, carrying a yearly economic cost of up to EUR 940 billion
• About 55 million people have asthma in the US and Europe combined. Particle pollution is found to be a major cause of asthma
• Rapid increase in instances of wildfires in the US and globally showing an increase in the risk of both cardiovascular- and respiratory-related effects
• Increasing IoT adoption is fueling growth of smart home market going forward

Business Segment

• ~4/5 of today's building will still exist in 2050 meaning we need to find ways to improve their sustainability
• 40% of global energy consumption comes from commercial buildings representing an enormous opportunity to save costs and CO2
• Most existing buildings don't have an automated system for HVAC control
• 6 out of 10 students are exposed to CO2 levels higher than the recommended threshold of 1,000 ppm
• Regulation and Legislation for building energy performance and health of workers
• IoT and digitalization for more efficient facility management
• ESG and sustainability

Breathe better. Live better.

Q&A