Letter from the Chairman Lassi Noponen - April

The benefits of diversification

Following the release of our Annual Report, I would like to take a moment to talk about one of the fundamental building blocks of Loudspring’s long term value creation strategy: Diversification.

Loudspring is a diversified portfolio comprised of a family of companies that through cooperation and resource sharing are stronger working alongside each other than they are on their own. Furthermore, because of the Loudspring platform and business development backing, our family of companies are better positioned to reach leading positions in each of their relevant markets.

Our portfolio companies are diversified across geographic markets, industry verticals, technological applications, and areas of impact. This multi-layered diversification of our portfolio serves several purposes: First, by having key holdings across Europe, Asia, Africa and the United States operating in radically different market sectors, we can dampen the risk for our shareholders. While some of our companies may face challenges at any given time, others will be taking big leaps forward. Secondly, in addition to the financial benefits, a diversified portfolio broadens our positive environmental impact.

All our companies share a common mission: saving natural resorces. The planet’s resources are finite, and focusing on solving this issue is the one place where we do not want to diversify one bit.

Fundamentally, diversification is the tool we use to capitalize on the substantial upside of growth companies without being fully exposed to unhealthy levels of risk. Reducing risk by investing into a portfolio of firms rather than individual firms is nothing new, and, if anything, quite a conservative thing to do. While at Loudspring we like to be progressive on a number of fronts, the realities of risk exposure are something we also take seriously.

The global problems our companies are solving are massive and as a result, present equally large opportunities. Of course, tackling these carries with it major financing challenges especially to growth companies and our portfolio companies are not immune to these. As we have said often, not all companies will succeed but success will come to those companies that are poised to play the long game, and to achieve this we aim to succeed by carefully calculating the risks we take while remaining healthily diversified.

To best way to depict the diversification we have built into our portfolio over time is to briefly revisit our core holdings (see strategy update here):

Eagle Filters:

I recently had the unique opportunity to visit a customer of Eagle Filters, a gas plant in Helsinki. I started my career at Neste, and worked closely with the natural gas unit that was deeply involved with the gas assets in the region. Re-visiting this kind of energy producing utility was moving and exciting to see the progress that is being made to move these assets into the modern economy.

At this plant alone, 1 776 Eagle Filters have been installed since 2013. In one turbine alone, 2 MW of output degradation has been prevented compared to previous filters in use, which correlates to around 3% in output and 1.5% in efficiency gains for the plant.

To put this into perspective, this translates to thousands of tonnes of CO2 waste avoided and excess cash in the pockets of the power plant owners.

The global opportunity for efficiency improvements with Eagle’s solutions is in the tens of billions of euros and Eagle has been accumulating the references it needs to win markets locally, in Asia, and the Americas. The great thing about Eagle’s products is that it is recurring revenue with the best customer retention we have yet seen. Eagle has the potential to soon become a cash-generative asset in the Loudspring portfolio.

Ownership: 63.4%

Countries of operation: Europe, North and South America, Asia and Africa

Nuuka: Connecting sensors and data sources in commercial real estate buildings and giving owners the tools to create more efficient, livabile and productive buildings is what Nuuka does. This is an incredibly exciting space to be working in as real estate accounts for more than half of total global assets. Currently, Nuuka has a growing number of buildings in 8 countries under management. The world is undergoing continued urbanization, and in our opinion whoever does the best job in optimizing the exponentially growing number of sensors and data points in the world’s real estate is going to be very powerful and profitable indeed.

Nuuka recently announced a new customer in ICA Real Estate, who owns over 170 major commercial properties in the Nordics with the market value of wholly-owned Swedish properties recently assessed at SEK 12.2 billion. Nuuka operates a SaaS model. As the number of buildings using Nuuka’s system increase and the level of service provided (and billed) for each building is increases, the company gradually builds a stable software service fee base that has the potential to be a lucrative long term business.

Ownership: 46.8%

Countries of operation: Finland, Sweden, Norway, Baltic States, the Netherlands, USA

ResQ Club: Reducing food waste by linking producers and consumers. The company is successfully executing its strategy and has managed to save almost 600 000 meals in the process. As early investors, we are humbled by this achievement and will continue to foster their growth into the future. When we invested in ResQ Club we were aware that several competitors around Europe existed in the food rescue business, but we also knew that execution is the key. At the end of the day, competition is good for innovation and consumers. In this case, it is also very good for the planet too.

As there is a big opportunity for many players to grab, we are very focused on speed of execution primarily. ResQ has had its share of bumps along the way, and we have made several corrective measures in this firm to have the right people, funding and corporate governance in place. We believe that with the current team the company is in a good position to compete in the growing food rescue industry. The best thing about ResQ’s digital nature is that the business can become cash flow positive sooner than many realize.

Ownership: 17.8%

Countries of operation: Finland, Sweden, Germany, Netherlands

Enersize: Enersize saves energy in compressed air systems and does so where the environmental impact of these systems is greatest: China. Recently Enersize has also announced their expansion into Germany, showing that there is efficiency to be gained just about everywhere. They continue to find opportunities for growth, and they are working on their R&D in Sweden that will set them even further apart from any competition. Their impact is tremendous and their approach unique. In the past 12 months Enersize has announced a number of new large customers in China. The company was listed in Nasdaq First North Sweden in 2017.

Ownership: 35.6%

Countries: Finland, Sweden, China, Germany

Nocart: Developing renewable energy projects in Europe and in the developing countries around the world. The technology that Nocart offers is in line with the way that developing countries will grow and prosper. The affordable micro-grids that Vesa Korhonen and his team are providing can be a game changer in many circumstances. Communities will be electrified, food will be grown locally, countries will thrive, all because Nocart can provide solutions that large companies cannot. Project deliveries are very challenging, especially for small companies as we have seen, but the fundamentals of the business opportunity have never been more exciting.

Ownership: 19.3%

Countries: Finland, Asia, Africa

Swap.com: Radically changing the way Americans, and eventually the rest of the world, will use and shop for clothing (or any other previously single use item). They have 2.2 million unique items on their platform, and the customer satisfaction levels they enjoy are enviable. Marc Onetto, previously Senior Vice President of Worldwide Operations and Customer Service for Amazon, who is an investor and advisor to Swap.com has said that Swap.com is a 100 billion dollar market opportunity.

Ownership: 6.6%

Countries: USA

Sofi Filtration: Sofi Filtration is providing a critical technology to ensure that we can continue to provide clean water to our growing populations. Sofi is yet another example of how we are finding value in the cracks. Loudspring is developing a new market for home water filtration, and while it is too early to reveal the details here, what I can say is that where we have already proven success in industrial filtration, we aim to do that and more for residential use.

Water is the world’s most important resource. We are in a position to provide clean water to millions of people in a cost-effective manner. Sofi has already made deliveries to large energy utilities, mining and land construction companies, and interest in the technology is steadily increasing with the positive customer project results.

Ownership: 25.2%

Countries: Finland, North America

We also have other portfolio companies and we are constantly on the look out for new opportunities that can fit into our Loudspring family of companies and add another layer of value both for our shareholders and for the planet. These opportunities are all in different geographical areas and in different sectors. However, they are all serving one common purpose: saving natural resources.

Playing the long game

Of all the feedback we have ever had from our shareholders, one of the best comments has been from an investor from Stockholm, Alexander Irinachos. Alexander joined us for the Sexy Truth Impact in Helsinki last year and in an interview that you can watch here, Alex explains his initial motivation and reason for buying the Loudspring share:

“I have never seen anything in the Nordic marketplace that is diversified, that has this active role in the portfolio companies, and that has this focus and strategy of not just investing in highly capital intensive clean energy generating companies, like solar PV, but companies that are ‘born global’... Nordic and Scandinavian companies. Highly innovative companies that can scale around the world and make a difference.”

In this one statement, Alex captured exactly how we see ourselves at Loudspring. Exactly what we see as our competitive advantage too. It seems to me that overall we have never been in a better position than where we are today. Our companies are facing challenges daily, but the challenges of today are mostly ‘better challenges’ that relate to our rapid growth (such as financing this growth). In times like these the most important thing is to continue doing what we have always done and support our companies in every possible way we can. We are focused on the task at hand, and are in the game, giving it our all.

Given recent feedback from our shareholders, we have made a commitment to during this year deepen our level of communications and to provide our shareholders a better understanding of the business fundamentals of our portfolio companies as well as their positive environmental impacts. Focus will be on our core holdings and, as we do not control our minority-owned portfolio companies, we are reliant on them for information.

Please do follow our upcoming communications. We make this commitment because we are humble enough to recognize when we could do more, but also confident enough to know the right course of action.

Contact information:

Joshua Burguete-Kirkman, Communications Director of Loudspring Plc. Tel. +46 70968 5584, joshua.kirkman@loudspring.earth

Loudspring in brief

Loudspring is a company group focused on saving natural resources, with offices in the Nordics and California. The Loudspring companies are active on global markets in five sectors: energy, real estate, fashion, food and manufacturing. Loudspring management consists of company builders combining positive environmental impact with business for over a decade.

The company group is listed on First North Finland under the ticker LOUD and on First North Stockholm under the ticker LOUDS.

www.loudspring.earth

LinkedIn: https://www.linkedin.com/company/loudspring/

Twitter: @loudspring

IG: @loudspring_earth

FB: @loudspringco

About Us

GROWING REVENUES WHILE SAVING NATURAL RESOURCES We operate on markets undergoing a revolution due to competition for resources, infrastructure overload, socio-economic change and decreasing cost of key technologies. Our companies are high impact, capital light, and scalable. We share their journey to success and try to help accelerate it.

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Quick facts

Swap.com has 2.2 million unique items on their platform, and the customer satisfaction levels they enjoy are enviable.
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ResQ Club is successfully executing its strategy and has managed to save almost 600 000 meals in the process.
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Nuuka recently announced a new customer in ICA Real Estate, who owns over 170 major commercial properties in the Nordics with the market value of wholly-owned Swedish properties recently assessed at SEK 12.2 billion.
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At a plant in Helsinki, 1 776 Eagle Filters have been installed since 2013. In one turbine alone, 2 MW of output degradation has been prevented compared to previous filters in use, which correlates to around 3% in output and 1.5% in efficiency gains for the plant.
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Quotes

Loudspring is a diversified portfolio comprised of a family of companies that through cooperation and resource sharing are stronger working alongside each other than they are on their own.
Lassi Noponen
Eagle has the potential to soon become a highly cash-generative asset in the Loudspring portfolio.
Lassi Noponen
In times like these the most important thing is to continue doing what we have always done and support our companies in every possible way we can.
Lassi Noponen