Earnings call transcript: Airthings Q1 2024 sees revenue dip, stock rises

Airthings ASA (AIRX) reported its Q1 2024 financial results, revealing a slight revenue decline but a notable improvement in gross margins. The company, known for its radon detectors, saw its stock price increase by 4% following the announcement. According to InvestingPro data, the company is currently trading at a low revenue valuation multiple, with a market capitalization of $25.52 million. Despite a 3% year-over-year revenue decrease, the market responded positively to the company’s strategic focus and operational efficiencies.

Key Takeaways

• Q1 2024 revenue stood at $9.2 million, at the lower end of guidance.
• Gross margin improved to 61%, indicating operational efficiency.
• Stock price rose by 4% post-announcement.
• Business segment revenues surged by 56%.
• The company continues to focus on North American markets.

Company Performance

Airthings experienced a mixed quarter with total revenues falling by 3% compared to the previous year. This decline was primarily due to a 13% drop in consumer segment revenues. However, the business segment showed robust growth, with revenues increasing by 56%. The company has continued to strengthen its position in the radon detection market, particularly in North America, which accounts for 81% of its revenues.

Financial Highlights

• Revenue: $9.2 million, a 3% decrease year-over-year.
• Gross margin: 61%, showing improvement from previous periods.
• Annual Recurring Revenue (ARR): $4.4 million, a 4% increase.
• EBITDA: -NOK 2.1 million.

Market Reaction

Following the earnings call, Airthings’ stock price increased by 4%, closing at $0.13. This movement was within its 52-week range of $0.10 to $0.31. The market’s positive reaction appears to be driven by the company’s improved gross margins and strong performance in its business segment. InvestingPro analysis suggests the stock may be undervalued at current levels, with additional insights available in the comprehensive Pro Research Report.

Outlook & Guidance

Airthings has provided Q2 revenue guidance ranging from $7 million to $9 million. The company is currently undergoing a strategic review and is exploring capital-raising options, including the potential sale of business segment assets. Despite not reaffirming previous profitability targets, the company remains focused on long-term growth.

Executive Commentary

CEO Emma highlighted the company’s strategic focus, stating, "We entered 2025 with a leaner organization, a focused strategy and with a commitment of improving profitability." Helge, another executive, emphasized the importance of securing additional capital, noting, "It is prudent to secure additional capital to make sure we have a robust foundation to drive long term growth."

Risks and Challenges

• The company faces uncertainty in achieving previous EBITDA breakeven targets.
• Capital-raising efforts may dilute existing shareholders.
• The consumer segment’s declining revenues pose a challenge to overall growth.
• Market competition in the radon detection space remains intense.
• Economic conditions in primary markets could impact sales.

Q&A

During the earnings call, analysts inquired about the company’s European sales composition and the momentum in the B2B segment. Executives confirmed continued focus on North American markets and did not reaffirm previous profitability targets, highlighting ongoing strategic evaluations.

Full transcript - Airthings ASA (AIRX) Q1 2025:

Emma, CEO or Senior Executive, Airthings: It’s exciting times for companies operating within the consumer market these days and especially having the main market in The U. S. Too exciting, I would say. There’s lots of rapid and unpredictable changes and that creates purchasing behavior amongst consumers and our distribution partners. And at the end of this presentation, we will share our view on the market and the outlook going forward.

And first, as announced a couple of weeks ago, Airthings signed a letter of intent for a potential sale of our business segment assets. We also initiated a broader strategic review, including all business segments. We do have received interest from multiple parties and the go shop period is ongoing. So we will update the market as the process progresses. So to the key takeaways from the first quarter.

Revenues came in at $9,200,000 And in contrast to the previous quarters, we now saw a decline in the consumer segment and a significant increase in the Business and Pro segments. In the quarter, we shipped over 70,000 consumer devices, indicating a continued strong demand for radon specific products in the North American region. 70,000 devices, that is approximately the same level as the equivalent quarter last year. The gross margin is improving compared to the fourth quarter, and that follows an active decision to drive improved unit economics. And in the first quarter, we collaborated with the Harwood Healthy Buildings team to study how the LA wildfires in January affected the indoor air quality in nearby homes.

And we did that by using real time data from approximately 1,500 AirThings monitors across approximately 1,000 homes in L. A. And that showcases the potential that lies in our vast data collection. And a bit more into the details on the Q1 key takeaways. We entered 2025 with a leaner organization, a focused strategy and with a commitment of improving profitability.

The revenues of $9,200,000 that’s within our guiding range, although at the lower end. So despite increasing awareness and demand in North America, the revenues from the consumer segment dropped by 13%. That decline was driven by, firstly, lower realized product prices and secondly, increased uncertainty and reduced more cautious purchasing behavior from our distribution partners. And that follows the overall uncertainty regarding the consumer spending in The U. S.

So optimization of supply and availability of products across our channels, that was the main priority in the first quarter. Remember in the Q4 presentation, we also mentioned that we had periods where we were out of stock in Q4 and the beginning of Q1. Revenues in the business segment increased by more than 50% in the quarter. And while it should be noted that Q1 last year, sales in the business segments were modest. But anyway, it’s very satisfactory to see that the growth that we have now, it comes from reorders from large enterprises, confirming a good customer retention.

And the gross profit is down 3%, while the gross profit margin is up from 45% last quarter and stable compared to the equivalent quarter last year. Our annual recurring revenues came in at $4,400,000 That corresponds to an increase by four percent, which is mainly driven by the business segment. And to get our products into the hands of our customers, that’s our ultimate goals. One way of measuring that is by measuring device registrations. So these graphs, they illustrate the growth in new devices registered.

And as we see on the left hand side here, there is a slightly decline. That means that we did not see as many devices registered by consumers in this quarter as we did in Q1 last year. The reason behind that is that we have seen a bigger increase in sales of our Correntium Home radon detector, which is an unconnected device. So it doesn’t relate to these numbers. And on the right hand side, we can see a 15% increase in devices registered by businesses.

And that follows the exact same logic as the growth in the business segment, that is by reorders from large enterprises. And then I will come back to the product development and launches that we are working on. But before that, Helge, please dig a bit deeper into the financials on segment level.

Helge, CFO or Financial Executive, Airthings: Thank you, Emma. So starting with the Consumer segment, which is more than 70 of our revenues, like Emma said, a bit of change in the trends. Last quarter, we saw relatively significant growth momentum, whereas this quarter, we report a declining top line. We talked a lot about margin in the Q4 presentation. We had some onetime items, and the quarter was also impacted by campaigning related to the important Q4 sales events.

We said that we expect margin to recover, and we see that in the report now that we see that we’re coming back up to 53% gross margin. However, the gross margin is still lower than what it was a year ago, and that is something we actively have to work continue to work on. 13% revenue decline, like Emma said, it’s driven by a combination of average realized prices being under pressure, but also quite high campaign activity, especially in the beginning of the quarter. It’s eventful doing retail and consumer electronics. We have been busy in the quarter and also actually in Q2 negotiating and renegotiating agreements with key partners.

We have been successful with several milestones in the first quarter, but it will take time before you see the effects of these renegotiations hitting the P and L. We’ll come back to some of the kind of business environment and what we see in the market in the outlook session later on. One other thing to comment is that we still see significant healthy demand for the safety related products. And for us, that means the RaidOn first products, where we see that the devices are very popular. So for us, it’s about managing the unit economics and continue to kind of follow the campaigns and the economics of the different campaigns that we are running.

On the business side, continuing with a kind of a healthy rebuild, I would say, 56% revenue growth, of course, very high. Q1 twenty twenty four was kind of a relatively weak quarter in the history of everything for business. But we see that the mix of business is quite healthy. And we see recurring orders from large, large enterprise customers giving us kind of renewed trust, which is good. Gross margin is high, 78% in the quarter.

In quarters where there’s a relatively low share of hardware and high share of subscription business, you will have margins like this. And we typically renew a lot of contracts in Q1, trying also then to pass on price increases. We have annual recurring revenues of roughly $4,400,000 in AirThings right now. Emma mentioned the development in the B2B ARR, quite stable growth, three point three million and 4% growth. The Pro segment is also kind of showing very stable and healthy trends, I would say, now at around an ARR of $1,100,000 All right.

So then let’s look at the P and L. Comparing to last Q1 last year, we see stable gross margin, 61, and recovering from Q4, where we both had certain onetime items, but also heavy campaign activity taking its toll on the gross margin. Total revenues declining 3%, driven by the consumer development that we talked about. And we also state in the report that the revenues in the Consumer segment were below our internal ambitions. I’ll come back to details on the OpEx later on, but we report an EBITDA of minus NOK 2,100,000 year on year development, mostly explained by the revenue development.

One thing to comment on in the P and L is the net financial items, where you see quite significant change from Q1 last year, and that is solely driven by the currency development since we have Norwegian krona as functional currency, and there’s been a quite volatile development towards the dollar. Margin. Like Emma said, we delivered on our promise to have a kind of normalization and improvement of the margin, stable year on year. Consumer margin is where we kind of need to continue to pay attention. It has been under pressure for some time.

We have taken actions to rectify. I mentioned renegotiations of contracts, and then it’s also down to kind of the campaign activity and see what kind of room we have to maneuver on that space. Healthy margins both in the business and the Pro segment. OpEx, of course, with revenues under pressure, we need to be scrutinized OpEx. We did a large reorganization in the Air Things last year.

In the P and L, we see effects reporting lower personnel costs, roughly $300,000 lower this quarter compared to last year. We’re trying to be cost conscious when it comes to travel, office costs and so on. But we do see increasing cost both in software and not least marketing. The marketing is mainly driven by two things. It’s AirThings preparing for launch with a new retailer called Target that we talked about last year, a very important new retailer for us that is adding some costs in the quarter.

And then it’s related to our activities in Canada, Canada being one of our most important markets together with The U. S. On the balance sheet, of course, compared to last year’s, you see the total assets going from 60,000,000 to around $40,000,000 The key things to note is, of course, on the goodwill and the deferred tax assets, where we made impairments in Q4 last year. And then on the cash, we reported cash of $5,400,000 at the end of Q1, and I’ll come back to the cash flow development later on. Working capital and inventory has been high on the agenda.

AirThings has been through a period with significant challenges, I would say, on the inventory. We have been able to drive that down and had good progress the last quarters. We saw a slight increase from Q4 to Q1, and this is an area that we must continue to work actively on, especially since we have increased uncertainty in the consumer segment, and that makes it harder to plan both production and inventory management, but it’s high on our agenda. We have inventory worth of around $11,000,000 in ending Q1. Compared to earlier quarters, you see a more healthy mix between consumer, business and components.

So roughly onethree is now consumer related finished goods and 43% belonging to the Business and the Pro segment. Then quickly on the cash flow statement. Starting the quarter, we had 8,800,000 in cash. Then we have had operational losses and a negative development on the working capital. I mentioned a slight increase in the inventory and also a slight increase in accounts receivable.

In totality, we end the quarter down $3,500,000 in cash and now have $5,400,000 at the end of the quarter. When it comes to our kind of funding and cash balance, remember that we have the revolving credit facility as well of $5,000,000 that is available for AirThings. We renewed that one earlier this year, and it’s valid throughout 2025. All right. So with that, I’ll hand over to you again, Emma, and we’ll come back to discuss the outlook later.

Emma, CEO or Senior Executive, Airthings: Thank you, Helge. Yes. So as shared, when we updated our strategy in August, we have chosen to focus on the safety related products, with radar being the main driver. And that is because that’s what has actually contributed to the significant part of the growth over the last couple of years. That’s where we see the strongest pull effect in the market, and that’s where our consumers have changed their perceptions, thinking of our products as a must have in contrast to a nice to have product.

And we are excited to see continued market validation of our leading radon detector. And as more and more people now measure radon in their homes, we also see a stronger increase in the sales of our Correntium home. And radon levels, they do fluctuate over year, and we see the most elevated levels during the winter month. So the radon season is Q4 and the beginning of Q1. And as we can see with this graph here that the sell through numbers in North America increased by 28% in the radon season this year compared to the year before.

But when we look specifically at Correntium Home two, it actually increased by 45%. So this is no good news related to device registrations, as we talked about earlier, But we are very happy about this trend as we are now launching our next generation Correntium Home, the Correntium Home two, which is a connected version. And in addition to that, we launched a lot of new value across the user journey. So to the on the left hand side here, it’s all about content to create even more awareness. So this is up to the left corner.

That is an example of a video that we have produced together with BBC Storyworks. And here, you see an upgraded version of radonmap.com, where we enable our users to search by state in The U. S. And province in Canada. For those already owning an AirThings device, we have also improved the user experience across hardware and software.

So a new and improved home screen is available. We have more than 70% more reliable sync via Bluetooth. We have an upgraded screen where you now can see four sensor values on our flagship product, ViewPlus. And for those interested in the insights that they can read out of our data, we have now made it much easier to understand what’s in the air you breathe. And as more and more people now are connected, it is the perfect timing to launch a referral program to make it easy for our customers to refer their family and friends.

So we are very happy to see this innovation happening. And there is a significant potential in the use of proprietary data and insights. We have a substantial base of pretty hard to obtain data. We’re talking about more than five seventy billion measurement data points. And going forward, it’s all about how we do capitalize on those data points.

And as an example, with the improved radonmap.com, as I showed, better look and feel and a lot easier when you can actually search based on your preferred state. That makes it more engaging for people to look into radonmap.com, and it makes more people curious about radon, what is it, where is it, oh, I can actually see that it’s high in my neighborhood, then I need to buy an AirThings device to measure it. And by that, we get more users. And with more users, we have more products and more data points that will feed into our models, again, increasing our abilities to build even better software experiences going forward. So this is just the beginning of the future.

And as I mentioned in the beginning, University in relation to the wildfires that we saw in L. A. In January, that is also a good example on how we actually utilize data to empower people to breed better. And from that study, we could tell people living in L. A.

Now we know that during the wildfires, a lot of homes actually got elevated levels of dangerous particles in the air in their homes. And we could also let them know that the air quality in homes more than two miles from the burn area were affected. And of course, very important that insights like this and when we can educate people based on our data, it becomes so much more easy to understand the need of monitoring indoor air quality and why it’s so important. And most of our customers, they enter into Air Things based on a need of measuring something that is related to safety. And it is interesting to see that more and more customer feedback give us these sort of examples where people entering into Air Things because they would like to measure radon or particles in the air, but then they get more interested, more curious to understand what else in the air they breathe.

So I just wanted to show you this an example from a customer who says that I saw radon as a primary sensor and I know I live in what’s considered a high radon area. And then I really like the option to set different focuses in the app for productivity, headaches, radon, etcetera, and I’m learning more and more about different things in the air in my home and steps I can take to improve my air. And this is such a great example on how we will continue to innovate in this landscape. And then to summarize and share some views on the outlook in the future. So to sum up the first quarter that we’ve just been through, revenues for Q1 were within our guiding range.

We saw a decline in the consumer segment year over year, mainly driven by cautious purchasing behavior. We improved gross margins compared to the fourth quarter last year and stable compared to Q1 last year. Halger, would you like to share a bit on our

Helge, CFO or Financial Executive, Airthings: the outlook. Today is the May 28, so it’s only one month left of Q2. And I think uncertainty is kind of the key word. So although it’s one month left, our revenue outlook for Q2 is within the range of 7,000,000 to $9,000,000 Of course, we book revenues when we sell in to our partners or to direct customers. And there is still uncertainty on kind of the landing of the quarter due to the sell in process.

Of course, we’re making this outlook in an environment with increased uncertainty, especially for consumer companies. We are, of course, looking through all mitigating activities. I mentioned the renegotiations we have done. We are continuing to discuss with key partners related to tariff related price increases and how to mitigate. And we will review and are reviewing the total supply chain to see how we can mitigate potential costs coming from the tariffs.

But it is a quarter with increased uncertainty, and that’s why we still have a relatively broad range for the landing of this quarter. And then, of course, like Emma mentioned, we are in a strategic process. Of course, hopefully, that will lead to a conclusion soon. And the key thing is that the outcome of that process should also be able to kind of strengthen the foundation for Air Things that we mentioned several times in the stock exchange announcement and in the report today. So revenue guidance of 7,000,000 to $9,000,000 and that compares to Q2 last year where we had around $8,700,000 in revenues.

All right. So that’s the key comments on the outlook for the quarters. And then I think we have had some questions online.

Emma, CEO or Senior Executive, Airthings: Emma? Do we have any questions from the people in the audience or from online?

Moderator/Question Facilitator, Airthings: We have five questions from the online audience. From a private investor, what is the European portion of total sales?

Helge, CFO or Financial Executive, Airthings: Yes. So we reported, at least last year, around 81% of revenues being North America and the rest being the EMEA region. The vast majority of the 19% is related to Europe. I can come back on more details, but kind of that’s the vast, vast majority of the remaining revenues.

Moderator/Question Facilitator, Airthings: Next question is from Kristoffer van Bjornschen in DNB Markets. How should we think about the momentum in the consumer and business segment? Do you expect continued momentum in B2B?

Helge, CFO or Financial Executive, Airthings: Will you take first half, Emma?

Emma, CEO or Senior Executive, Airthings: Yes. We have discussed the B2B segment during the last couple of quarterly presentations that we have had, when we entered into 2024, we had spent a lot of focus on a couple of very large deals that we used a lot of efforts to complete. So we had a weaker pipeline entering into 2024. And then we built the pipeline throughout the last year, and we saw healthy growth of the underlying business in the business segment, and that we expect to continue. So yes, to answer the question, we expect the momentum in the business segment to continue as we see right now.

Moderator/Question Facilitator, Airthings: Thank you. And from another private investor, last quarter, you reiterated your target of positive EBITDA in second half of twenty twenty five and for the full year of 2026. Have you now dropped this target?

Helge, CFO or Financial Executive, Airthings: Yes. So we’re not reiterating those targets in this report. What we write is that the recent development adds uncertainty to those targets. And like we mentioned earlier as well, it is the view that we it’s prudent to secure additional capital to make sure we have a robust foundation to drive long term growth for Air Things. So when we gave those targets, I think we communicated in Q3 twenty twenty four and repeated since, the target was to reach EBITDA breakeven in the second second half of twenty twenty five and then for 2026.

The key thing to reach those target is, of course, revenue growth. We have made we’ve taken actions on the cost side, and we’ll continue to evaluate that as well. But you need to continue to see a healthy growth momentum for us to breakeven and reach profitability. So that’s the key thing to follow is the revenue trends and then especially in the consumer side.

Moderator/Question Facilitator, Airthings: Thank you. Another question from Kristoffer Wang Bjornsson in Denbigh Markets. You note that it’s prudent to secure additional capital. Is it fair to assume the company has a runway of a couple of quarters if top line momentum doesn’t improve materially? Are you primarily looking divestments to raise capital or also potential an equity issue?

Helge, CFO or Financial Executive, Airthings: Yes. I think on that one, I will just state what’s in the report that we think it’s prudent to secure additional capital. We ended the quarter with $5,400,000 in cash and have an RCF as well. But of course, if the revenue momentum continues to be soft, that would add additional pressure on AirThings. And that’s also why we mentioned the strategic review and strategic process ongoing.

Anything to add, Emma?

Emma, CEO or Senior Executive, Airthings: No. I think it’s just as you said then, as we also stated in the report, that we do believe that the ongoing strategic review also will help us securing the foundation for long term growth.

Moderator/Question Facilitator, Airthings: Thank you. No further questions from the online audience.

Emma, CEO or Senior Executive, Airthings: Any more questions from the people in the room? No? Okay. Thanks for listening in, everyone.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.