Huddly AS — Interim / Quarterly Report 2023

Aug 17, 2023

Q2 2023 Results

Presented by CEO Graham Williams and CFO Abhijit Saha Banik

Key highlights Q2 2023

Revenue of NOK 57 million Q2'23, +12% vs. Q1'23

Gross margin increase to 57%

• Reflects customer and product mix
• Positive effect of release of one-off sales provision
• Underlying gross margin of 50% in Q2'23

NOK -8 million EBITDA vs. NOK 3 million in Q2'22

• Stabilized cost base moving out of H1 2023

Huddly Crew: Successful product launch

• 850 customer demos since January 2023
• Sales of early adopter kits with great feedback
• General availability from August 2023

Launched a comprehensive and improved go-to-market strategy

Revenue and Gross Margin NOK million

Huddly's core purpose

3

"The belief behind what we are doing" "The actions we take to realize the why"

"The product and function we offer to provide tangible proof of our purpose"

THE WHY: To empower human collaboration

THE HOW:

We challenge the status quo to make hybrid teamwork productive and inclusive

THE WHAT: We craft intelligent camera systems that

combine AI, hardware and software

The workplace is converging to hybrid mode

Huddly is well-positioned to monetize on the post covid-19 workplace mega trends

Growth is mainly driven by increased penetration rate, in addition to higher prices e.g., due to intelligent features

6

Percent of rooms video-enabled

Shaping a new category for AI camera systems

7

Leveraging Huddly's extensive experience in AI and machine learning since the company foundation in 2013

Huddly Crew

• The world's first AI-directed multi-camera system
• Using insights from TV and movie production, it creates an engaging and inclusive experience through a variety of shot types
• Flexible & modular hardware adapts to most meeting spaces

Introducing Huddly Partner Program

• Three different levels to fit business models of channel distributors and strategic partners
• The higher level, the greater the benefit
• 400 partners signed so far (240 Authorized, 110 Premier and 50 Platinum)

1. Platinum

Highest, most exclusive tier reserved for our most qualified, engaged, and invested partners. Benefits and dedicated support are best in class.

2. Premier

Advanced-level tier for partners with proven expertise and capabilities who want to accelerate market success with generous discounts and resources.

3. Authorized

Entry-level tier for partners who want access to foundational resources and benefits to help build their business with Huddly.

1. Continue to lead with technology innovation

2. Strengthen strategic partnerships & channel sales

Product led growth through continued R&D investments

Broaden revenue base Higher channel revenue and monetization of software solutions

4. Managing costs to address near-term challenges

Without jeopardizing longterm growth opportunities

Maintaining four focus areas to support long-term growth

Summary: Huddly investment thesis

Humans at work AI at work

✓Customer pain paints worth solving ✓Attractive and growing market

✓Innovative portfolio of products ✓Barriers to entry developed since 2013: Image based AI and machine learning is hard

Financials

Abhijit Saha Banik CFO

Revenue development

Revenue development and split

NOK million, % of total revenue

Revenue of NOK 57 million resulting in a 12% increase compared to Q1 2023

• Sales to Channels increased by 34%
• Strategic partner sales stable

Q2 2023 revenue decreased 46% vs. Q2 2022

• Sales to Channels stable
• Strategic partner sales decreased by 63%

Increased focus on Channel sales and monetizing software going forward on the back of the strengthened commercial organization

• Gross Margin of 57% in Q2 2023 vs 46% Q1 2023
• Reflects changes in customer and product mix
• Positive one-off effect related to release of sales provisions
  • − Underlying gross margin of 50% in Q2 2023
• Gross margin in the second half of 2023 is expected in line with the underlying gross margin

Improved margins due to changes in customer and product mix

Gross margin development

Gross margin (%)

• Revenue decline due to the inventory position of strategic partners
  • H1 2023 revenue representing base line for continued growth
• Gross profit reduced compared to same quarter previous year, reflecting reduction in sales to strategic partners

Profit and loss

Condensed profit & loss statement NOK million

	Q2 2023	Q2 2022	Change	H1 2023	H1 2022
Revenue	57.2	106.6	-46 %	108.4	220.7
Gross profit	32.6	41.1	-21 %	56.0	82.7
Gross margin	57 %	39 %		52 %	37 %
Operating expenses	-40.5	-38.0	-7 %	76.2	78.7
EBITDA	-7.9	3.1		-20.1	4.0
Operating profit (EBIT)	-24.9	-9.5		-52.6	-20.4
Net financials	1.9	10.5		6.8	8.8
Pretax profit/loss	-22.9	0.9		-45.8	-11.7

R&D investments to drive long-term growth

Capitalized R&D cost

NOK million, % of revenue

• Capitalized R&D cost of NOK 13 million in Q2 2023 representing 22% of revenue
• 16% reduction in capitalized R&D cost in Q2 2023 compared to Q2 2022
• Continued investments to defend Huddly's leading technological position in the market
  • 63 engineers, with deep and extensive experience in AI, machine learning, software development and hardware
• Successful monetization of the innovative software solutions will be crucial to build strategic value and establish a more robust margin position in the future

Q2 2023 cash flow

Cash flow

NOK million

• Cash flow from investments of NOK 13 million mainly related to capitalized R&D cost
• Cash flow from financing activities of NOK 5 million reflects payments of lease liabilities
• Cash balance at 30.06.23 of NOK 54 million
• Additional NOK 50 million available liquidity in committed shareholder loan brings total liquidity at period end to NOK 104 million

Outlook & Key Priorities

Graham Williams CEO

Continued focus on key priorities

Stabilize in 2023 and Grow in 2024

200-250

~50%

Revenue (NOKm)	108.9
Gross margin	52%
Cost base	Stabilized
Capitalized R&D

H1 2023 FY 2023

Continued investments to defend leading position

FY 2024

Increase

Reduction in H2 23

Huddly AS, Q2 2023

Appendix

Interim consolidated statement of profit of loss

Reported financials

24

Amounts in NOK 1,000	Note	Q2 2023	Q2 2022	YTD June 2023	YTD June 2022	2022
Sales of goods	3	57,163	106,612	108,394	220,675	451,597
Total revenue		57,163	106,612	108,394	220,675	451,597
Cost of goods sold		(24,596)	(65,467)	(52,369)	(137,967)	(284,178)
Gross profit		32,567	41,145	56,025	82,708	167,419
Employee benefit expenses	4	(23,113)	(24,248)	(44,912)	(51,541)	(111,323)
Other operating expenses		(17,396)	(13,813)	(31,251)	(27,127)	(54,456)
Amortization and depreciation		(16,920)	(12,589)	(32,471)	(24,454)	(52,790)
Total operating expenses		(57,429)	(50,651)	(108,634)	(103,121)	(218,569)
profit/(loss) Operating		(24,861)	(9,506)	(52,609)	(20,413)	(51,150)
Interest income		-	-	-	-	4,586
Other financial income		-	-	-	-	-
Interest expense		(267)	(140)	(271)	(269)	(459)
Other financial expense		(985)	(4,580)	(3,164)	(8,433)	(3,080)
Net foreign exchange gains (losses)		3,190	15,169	10,209	17,458	8,559
Net financial items		1,938	10,449	6,773	8,757	9,606
Profit/(loss) before income tax		(22,923)	943	(45,836)	(11,656)	(41,544)
Income tax		-	-	-	-	-
Profit/(loss) for the year		(22,923)	943	(45,836)	(11,656)	(41,544)

Profit/(loss) for the year is attributable to:

Owners of Huddly AS

Earnings per share in NOK

Basic earnings per share	(0.11)	0.00	(0.22)	(0.06)	(0.20)
Diluted earnings per share	(0.11)	0.00	(0.22)	(0.06)	(0.20)

Average shares exclude own share 211,028,032 211,028,032 211,028,032 211,917,920

(0.06)	(0.20)
(0.06)	(0.20)

Interim consolidated statement of comprehensive income

Reported financials

Amounts in NOK 1,000	Q2 2023		Q2 2022 YTD June 2023 YTD June 2022		2022
Profit/(loss) for the year	(22,923)	943	(45,836)	(11,656)	(41,544)
Other comprehensive income:
Items that might be subsequently reclassified to profit or loss:
Exchange differences on translation of foreign operations	6,881	(921)	1,726	(376)	508
Total comprehensive income for the year	(16,042)	22	(44,110)	(12,032)	(41,036)

Interim consolidated statement of cash flow

Reported financials

Amounts in NOK 1,000	Note	Q2 2023		Q2 2022 YTD June 2023 YTD June 2022		2022
Cash flows from operating activities
Profit/(loss) before income tax		(22,923)	943	(45,836)	(11,656)	(41,544)
Adjustments for
Taxes paid		-	-	-	-	-
Depreciation and amortization		16,920	12,589	32,471	24,454	52,790
Net interest income		-	-	-	-	-
Share-based payments expense	4, 7	571	-	(5,180)	24,399	24,399
Change in trade and other receivables		4,270	9,585	3,768	7,814	25,532
Change in trade payables		(5,943)	6,827	3,066	(10,089)	(34,941)
Change in other current assets and other liabilities		(35,265)	(34,914)	(73,303)	(27,795)	(39,475)
Interest received		-	-	-	-	-
Net cash inflow from operating activities		(42,369)	(4,972)	(85,014)	7,127	(13,238)
Cash flows from investing activities
Payment for property, plant and equipment		(205)	(1,400)	(1,479)	(4,087)	(7,775)
Payment for investments in intangible assets		(12,613)	(14,960)	(32,838)	(36,122)	(73,779)
Receipt of government grants		-	-	-	-	-
Other investing activities		-	-	-	-	-
Net cash (outflow) from investing activities		(12,818)	(16,361)	(34,317)	(40,209)	(81,554)
Cash flows from financing activities
Proceeds from issuance of ordinary shares		-	-	-	-	-
Share repurchase		-	-	-	(40,486)	(40,486)
Repayments of lease liabilities		(5,446)	(4,306)	(10,848)	(8,179)	(17,717)
Paid interest on lease liabilities		(31)	(140)	(107)	(278)	(488)
Net cash inflow from financing activities		(5,478)	(4,446)	(10,955)	(48,943)	(58,691)
Net increase/(decrease) in cash and cash equivalents Cash		(60,665)	(25,778)	(130,287)	(82,025)	(153,484)
and cash equivalents at beginning of period		114,331 25	280,921	183,900 76	337,276	337,276 108
Effects of exchange rate changes on cash and cash equivalents Cash			1,825		1,718
and cash equivalents at end of period		53,690	256,967	53,690	256,968	183,900

Interim consolidated statement of financial position

Reported financials

		At June 30	At Des 31	At June 30
Amounts in NOK 1 000 ,	Note	2023	2022	2022
ASSETS
Non-current assets
Goodwill		8 018 ,	8 018 ,	8 018 ,
Intangible assets		172 699 ,	159 291 ,	139 286 ,
Tangible assets		882 7 ,	8 782 ,	411 7 ,
Right-of-use assets		1 660 ,	12 520 ,	17 356 ,
Deferred tax asset		-	-	-
Other receivables non-current		33 003 ,	19 000 ,	19 000 ,
Total non-current assets		223 262 ,	207 611 ,	191 071 ,
Current assets
Inventories		27 389 ,	14 887 ,	16 650 ,
Consignation inventories		101 884 ,	117 864 ,	93 061 ,
Trade receivables		68 074 ,	71 842 ,	89 560 ,
Other receivables current		37 396 ,	41 648 ,	37 915 ,
Cash and cash equivalents	5	53 690 ,	183 900 ,	256 967 ,
Total current assets		288 433 ,	430 143 ,	494 154 ,
ASSETS TOTAL		511 695 ,	637 754 ,	685 225 ,

Interim consolidated statement of financial position

Reported financials

		At June 30	At Des 31	At June 30
in Amounts NOK 1 000 ,	Note	2023	2022	2022
EQUITY LIABILITIES AND
Equity
Share capital		135	135	135
Share premium		468 127 ,	468 127 ,	476 513 ,
Other paid in capital		301 710 ,	306 890 ,	298 874 ,
Foreign translation currency reserves		1 088 ,	(637)	545
Retained earnings		(423 881) ,	(378 045) ,	(358 610) ,
Total equity	6 7 ,	347 180 ,	396 470 ,	417 457 ,
Non-current liabilities
(non-current portion) Lease liabilities		-	-	-
Deferred liability tax		-	-	-
Other liabilities non-current		6 147 ,	650 7 ,	041 7 ,
Total liabilities non-current		6 147 ,	650 7 ,	041 7 ,
Current liabilities
(current portion) Lease liabilities		1 826 ,	12 674 ,	16 128 ,
Trade payables		38 469 ,	35 404 ,	60 256 ,
Current payables tax		-	-	-
Consignation liabilities		101 884 ,	117 864 ,	93 061 ,
Other liabilities current		16 189 ,	67 691 ,	91 283 ,
Total liabilities current		158 368 ,	233 633 ,	260 728 ,
liabilities Total		164 515 ,	241 284 ,	267 768 ,
LIABILITIES TOTAL EQUITY AND		511 695 ,	637 754 ,	685 225 ,