QleanAir AB (publ)

Thank you. Welcome to the Clean Air Investor presentation for Q4 2024. My name is Sebastian Lindström. I'm the CEO of Clean Air and joining me in today's call is Henrik Cressmajk, our CFO at Clean Air. As said, Henrik and I will go through the presentation and then open up for Q&A at the end. Starting off with the numbers for Q4, we closed another challenging quarter the absence of the curexa contract and the low point of japanese renewals to finance companies affected both top and bottom line positive in the quarter was that we started to ship the first of the newly launched products and that our cash flow improved both over last year and in a significant way over the previous quarter we delivered 104 million in sales which was 16 behind last year The main reason for the decline was the absence of the Curexa project of over 30 million Swedish kronor and lower sales in EMEA and APEC in general. Our recurring revenues remained stable at 77 million, amounting to 299 million on a rolling 12-month basis by the end of the year. The slight decline of 2% on a full year basis was related to the cancellation of school load orders post-COVID in Germany earlier this year. Our gross margin and EBIT were hurt, of course due to the lower sales, the absence of the Curexa contract and the low point of renewal base of contracts to finance companies in Japan. Our adjusted EBIT landed on minus 2.9 million versus 7.8 million last year. Adjustments made of 2.4 million were related to reductions and reorganizations done at the head office in Q4 in response to the weaker sales. The cash flow was strong at 17 million versus 14 million last year and a substantial improvement sequentially over Q3. Summing up the quarter, we have work to do. We'll keep our focus on the three objectives for long-term profitable growth, cost control, sales efficiency, and customer focus. To improve the understanding of our dependency on cyclical effects of historical renewals to finance companies, I added a picture available as well on page six in our quarterly report. The contracts we sell to finance companies, the orange part of the bars in the chart, are typically renewed on a 36-month basis, i.e. three years. This base of renewals we can do in any given year depends, of course, on the number of contracts we sold or renewed three years ago. In the graph, you can clearly see that in Q4 2021, three years ago, we had a real low point in sales to finance company. And that's why we talk about Q4 2024 being a low point in renewal base. On top of that, over the past three years, the Japanese exchange rate to the Swedish krona has worsened about 10%. and the sales to finance companies are mainly done in japan in this graph you can also see the absence of the curexa project under product sales so the light green bars at the top of the chart exceptionally low in q424 On such short notice as in the Curexa case, we have, in this kind of project business, no way of compensating in the short term. The material's been purchased, the resource has been booked. Looking at the quarter from a regional perspective, in APAC, Q4 sales came in at 44 million, 13% below last year for the quarter. Japan was clearly affected by the low point of the renewal base. Japan continues their strong growth in air cleaners, which grew 55% in the quarter and 44% for the year in local currency. Japan is now tied with Sweden as our second largest market within air cleaners. In EMEA, We achieved 61 million in sales, which was a decline of 14% versus last year. We continue to suffer the weaker economic environment with longer sales cycles. On the positive side, we see the members of the sales team in Sweden and Germany getting up to speed. The day before yesterday, I came back from this year's workshops in Germany, and I was impressed to see that one of the new members of the sales teams made the German top seller club for 24. I'm also happy to see, in EMEA in particular, how we've been able to address larger clients, both within the European food and beverage sector and the German defense sector, with installations at multiple locations and a large number of units installed in short time. When it comes to America, sales of 3 million SEC versus 8 million last year was a disappointment. but fully attributed to the absence of the Curexa project of over 30 million SEK. This affected our top and bottom line in the region in a major way. We filed a lawsuit towards Curexa in December, seeking coverage on our damages. On the positive side in the US, we saw a pickup again in the winning of new contracts after a few weak quarters. We're not only seeing further demands and winning contracts for additional clean rooms with existing clients, but gained a key new client in the quarter in the Northeast, exceeding 10 million Swedish kronor. We're continuing our pursuit of partnership with companies with complementary products addressing the same customer base to strengthen our offer and allow us to win more volume. When it comes to our focus, we stick to our three prioritized objectives, cost control, sales efficiency, and customer focus. On the cost side, given the weaker market conditions, we further reduce the central team. In Q4, we completed our supply chain consolidation and expected to improve our service cost in 25. We started our transition to our new service partner in Germany and it looks very promising. In 2024, we had significant cost increases due to the low performance of our previous partner. When it comes to improving sales efficiency, we've reorganized and simplified sales management in EMEA. Our strengthening and replacement of sales resources in both Germany and Sweden are coming along fine and picking up speed. The new products started to ship in the quarter and we have orders in all the key markets in Europe. Over to strategic customer focus. We continue our systematic approach to product development. Over the past three weeks I have, together with the product manager, visited and held workshops with all sales and service teams across the regions. The discussions and inputs have been very engaged and the regional teams are really feeling part of our product development process. The result of these interactions over the past two years is clear. The recently launched products are spot on on the critical needs of our clients. Going into 2025, we're further sharpening our focus within air cleaners in Europe and APAC on the industrial sector, and it's been very well received by the sales teams. A few words on this focus for 2025. As I said, we're sharpening that focus. In Europe and APAC, we will focus entirely on air cleaners and cabin solutions. Within cabins, we stay with a broad approach. We're a market leader. It's a mature market. And we're already strong in three out of four product areas, as you see on the right-hand side on the top. the cabins, outdoor lounges and smoking rooms. During 2024, we significantly strengthened our offer towards the smoking room segment with the FS70SRE Smoking Room Edition, allowing us to access and provide a very strong solution for this market area. When it comes to cabins, it's all about maximizing the reach. So the segment focus is wide. We're already in a lot of different segments, depending on the profile of each market, and we'll continue to do so. When it comes to air cleaners, which we see as an emerging market with strong growth potential, we will put our focus clearly on the industrial segment. The industrial segment is where we can fully leverage the versatility of our products, our ability to recirculate filtrated air, to create negative or positive pressure in a room, work with clean zones, and of course, a combination of these four. We've clearly seen in 2024 that once we focus, we're able to improve our sales efficiency by addressing similar clients within an industry, as well as being able to expand solutions to the same client in multiple locations. In 2024, we've been able to expand our business with a leading European food and beverage client to five countries and many more locations with around 100 units installed in austria and germany we've been able to expand to more than six locations and over 50 units installed with the key company in the defense industry with this more sorry back with this more focused approach on air cleaners we will get even closer to the clients and their pains related to indoor air quality and we can be faster in meeting their challenges with bespoke solutions we expect that this more in-depth understanding will help us in addressing more critical must-have application areas and thereby moving our margins up over time. With that, I hand it over to Henrik to take you through the financial update.

Thanks. In Clean Air Group, both EMEA and AFEC are strong contributors to sales, representing more than 90% of total sales. EMEA account for 54% of Clean Air Group revenues. germany is not reaching our targets but other european markets are contributing to a higher extent apec accounted for 43 percent of total revenues there is a clear demand for our solutions and we are gaining more and more traction with air cleaners through focused work on chosen customer segments japan had a lower revenues in 2024 partly because of the weak japanese gem And partly because of seasonality of our renewal contracts. Americas represents 3% of the total revenues. We are hurt by the cancelled Curexa contract in the quarter and we continue to experience longer sales cycles in general. We had a negative growth of 16% in the fourth quarter, reached the sales of 104 million SEC versus 124 million SEC a year ago. The recurring revenues accounts for 74% of the total revenues and amounts to 77 million SEC. It's a relatively stable quarter for the revenue type recurring revenues. The gross margin was 66% down from 67. And the adjusted operating profit was minus 3 million SEC in the fourth quarter versus 10 million SEC a year ago. In the fourth quarter, the operating margin was minus 3% adjusted. Last year, it was 7.8%. This slide illustrates the relation between the book values of units in Clean Air Balance Sheet and the revenue stemming from such units including service, the recurring revenues. The recurring revenues was 299 million SEK 2024. The recurring revenues are a solid base of revenues that to a larger extent are predictable in the future. The book value is relatively low, 48 million SEK, compared to the recurring revenues, and this is a contributor to our margins. To break these recurring revenues down per unit on an average, the revenue is approximately 64,000 SEK with a book value of approximately 10,000 SEK. We experience a high profitability on renting out the units over time. In 2024, we saw a decline in the installed base. School orders of air cleaners in Germany were not prolonged, resulting in fewer installed units. However, going forward, we see a growth in air cleaners in both EMEA and AIPAC. We have three different revenue streams. The mix of recurring revenues, sale to finance companies and product sale to end customers. The nature of our business is that we have a recurring revenue as a foundation of the total revenues. On top, we have a product sale, and that is customers that do not want to have a rental setup. We offer them to buy the units, and that is to a large part in the US. And as the Corexa contract was canceled, the product sales was low in the fourth quarter. And we also have revenue stemming from sale to finance companies. That is long-term rental contracts that are sold to finance companies, and that is primarily in Japan. Decline because of the Japanese yen and the seasonality 2024. The cash flow improved in the fourth quarter even though the operating profit was lower. Favorable changes in working capital compensated in the quarter. We continued to amortize according to plan every quarter and the net debt equity ratio was 0.8. In the quarter, we received a waiver from Swedbank. And mid-January 2025, we changed bank from Swedbank to Danske Bank. And going forward, Clean Air will continue to amortize each quarter. Handing over to Sebastian for a summary.

Thank you, Henrik. And to close off the session in front of the Q&A, What we do at Clean Air is important. We dedicate our work to improve the health of people, the quality of products and the performance of processes. And we do so throughout our three product categories, cabin solutions, air cleaners and clean rooms. Looking at the amount of clean air that is delivered through our solutions, we estimate that we clean 7.3 billion cubic meters of indoor air by end of Q4, and it matters. As air pollution is a key challenge for human health, people die prematurely from the exposure to polluted air. We spend an important time or important part of our lives in indoor environments and indoor air can often be more polluted than outdoor air. And let me reiterate, a number of measures have been initiated that we expect to yield results. We stick to our plan with a very systematic approach to both operational and strategic development. We have our three clear priorities, customer focus, sales efficiency and cost control. We continue our focused product development that just brought six new products to the market. We now sharpen our focus within air cleaners on the industrial segments to move faster and take a position in that emerging market. With that, I'd like to open up for questions.