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Loudspring Oyj: Q3 2021 Summary

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29th October 2021 at 9:00 (EEST)

Loudspring Oyj

Company release

Please note that this report is not a fully comprehensive report of all events, nor is it in any way a financial performance report. It is only a summary of the main events that have affected us and our portfolio during the quarter and before the date of this report where separately indicated below.

In the quarterly report we will not comment on every portfolio company but focus on our core holdings. To get a comprehensive overview of individual portfolio companies’ businesses one should review additional documents such as the company description and the supplement to the company description that were published in 2016, as well as the latest annual and semi-annual reports. These documents are available at loudspring.earth.

Loudspring Q3 summary

During the period, Loudspring decided to execute its option to acquire 100% ownership in Eagle Filters. This transaction is a continuation of Loudspring’s strategic decision to focus solely on the energy efficiency business area, and to divest other holdings. The next step will be unifying the management into one team, as well as streamlining the legal structure.

Nuuka developed well during Q3, signing several new customer projects. The company’s new AI product has been very well received and proven to create substantial energy savings and improved indoor climate. Some of the world’s leading real estate owners have started using Nuuka in a growing number of their buildings with excellent results. The growth as well as upsale potential by extending the service level and amount of buildings for existing customers is extensive. Nuuka’s current customers include ICA Real Estate, EDGE Technologies, H&M, and several cities including Helsinki. Nuuka has evidence that the value of AI solutions for diagnosing and optimizing buildings automatically 24x7 has strong demand, and is transforming the real estate industry. Nuuka currently applies AI for ventilation only. AI applications are being developed also for heating, cooling and total energy management. As a SaaS company using artificial intelligence (AI) and machine learning (ML) and operating in the highly attractive PropTech industry, the management sees the company as a valuable asset. 

Eagle Filters growth continued during Q3. The company targets almost 50% revenue growth for 2021 and the offer pipeline has continued to grow. Eagle’s high-performance filters increase electricity production up to 9%, improve fuel efficiency up to 2,5%, and prolong turbine life. The global focus on reducing CO2 emissions supports Eagle’s growth. As accelerating growth requires an increased amount of working capital and the respirator business has consumed more capital than anticipated, the company and Loudspring require additional funding. Loudspring plans to secure required funding through debt/equity funding and/or exit proceeds.

Key portfolio developments during Q1

Eagle Filters

  • Revenue for 2021 and current order backlog were EUR 4 million (unaudited) at the time of this report (revenue recognition expected for 2021 for the most part).
  • Revenue is targeted to grow almost 50% during 2021 compared to 2020.
  • The company was issued ISO 9001 and 14001 certifications.
  • The company received new fully automated production equipment for production of high quality low cost respirators. The new product versions will be launched after their production has been ramped up and CE certification process has been completed. Sales of current respirator products remain low due to price competition.
  • Eagle introduced new filtration materials for its industrial products that lower material costs while improving product performance.
  • Eagle continues material development, with a target of further improving the performance, cost efficiency and sustainability of various types of filter media.

Nuuka Solutions

  • SaaS revenues grew from 85k€ to 90k€ / month (unaudited) compared to Q2
  • Nuuka’s total focus is on achieving undisputed technology leadership in diagnosing and optimizing buildings automatically with Artificial Intelligence (AI) and Machine Learning (ML). The AI service has been well received by customers.
  • Nuuka has proven substantial savings and benefits from using AI. As an example, optimizing ventilation with Nuuka AI can save 15-50% of ventilation energy costs and emissions, and at the same time improving indoor climate.
  • During Q3 and October Nuuka has acquired more customer projects than in three previous quarters combined, signing/agreeing six new projects. The offer pipeline continued to grow.
  • Nuuka launched a new brand identity and increased marketing visibility, generating more leads.

Risks and Uncertainties

Loudspring Oyj (the “Company”) and its portfolio companies (the “Portfolio Companies”) are associated with a number of risks and uncertainties including but not limited to the following:

The Portfolio Companies of the Company are start-up and growth companies and Company’s value depends heavily on the future development of these companies and the Company’s ability to realize the value of its investments. The Company and the Portfolio Companies are associated with significant risks and uncertainties including but not limited to: 1) risks related to financial position and availability of additional financing that they are dependent on, 2) risk related to Portfolio Companies’ acquisitions, expansions and ability to sustain growth, 3) risks related to competition and technological development, 4) risks related to protection of intellectual property rights, 5) dependence on a limited number of key employees, 6) various business related risks, such as dependence on a limited number of clients, technical and warranty risks, credit loss risk and currency fluctuation risk, 7) insurance risks and 8) economic, political and regulatory risks in various markets.

There can be no assurance that the Company or its Portfolio Companies will become profitable, which could impair the Company’s and the Portfolio Companies’ ability to sustain their operations or obtain any required additional financing. Even if the Company or its Portfolio Companies would become profitable in the future, they may not necessarily be able to deduct the previous losses in taxation and sustain profit in subsequent periods.

Amendments to the laws and regulations and interpretations of laws and regulations relating to the Company’s or Portfolio Company’s business may involve negative effects to the Company or to the Portfolio Company in question. In the event of any litigation, authoritative or administrative proceedings, risks related to financial sanctions and/or limitation of business opportunities may occur. Any acts or alleged acts in conflict with the positive societal values, reliability and good quality of the Company or its Portfolio Companies, may damage the Company’s or its Portfolio Companies’ reputation, long-term profitability and value.

In addition, the Company is associated with inter alia the following risks that relate to its business operations as a development and investment company:

The Company’s ability to make profit fully depends on the potential exit proceeds and cash flows it may receive from its Portfolio Companies and all acquisitions and disposals of assets are subject to uncertainty. There is a risk that the Company will not succeed in selling its holdings in the Portfolio Companies at the price the shares are being traded at on the market at the time of the disposal or valued at in the balance sheet. Furthermore, the Company may be affected by liquidity risk if liquidity will not be available to meet payment commitments due to the fact that the Company cannot divest its holdings quickly or without considerable extra costs.

The Company does not independently control its Portfolio Companies, other than its daughter company Eagle Filters Oy, and there may occur potential interest conflicts with the other shareholders and stakeholders exercising influence over each respective Portfolio Companies’ operations or the information provided by a Portfolio Company to the Company may not be accurate or adequate. Furthermore, an investment in a Portfolio Company may be affected by the existence of shareholders agreements or articles of associations containing provisions restricting transferability of the Portfolio Companies’ shares or otherwise having an impact on the value of said shares.

Contact information:

Jarkko Joki-Tokola, CEO, Loudspring Oyj. Tel. +358 40 637 0501, jarkko@loudspring.earth

Erik Penser Bank AB, Certified Adviser. Tel. +46 8 463 83 00, certifiedadviser@penser.se

Loudspring in brief  

Loudspring is an investment group focused on saving natural resources. Our strategy is to focus on the ownership and governance in Eagle Filters where we see a clear path to a long term profitable and scalable business, and divest more opportunistic higher risk investments, transforming into an industrial company. Our customers saved 125 000 tons CO2 emissions during 2020 using our technology, which equates to the CO2 carbon footprint of 12 000 Finns on average. 

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

www.loudspring.earth

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

Twitter: @loudspring

IG: @loudspring_earth

FB: @loudspringco