NX Filtration N : Halfjaarlijkse financiële verslaggeving

NX Filtration Semi-annual Report 2023

Condensed interim consolidated financial statements for the six months ended 30 June 2023

Contents

Report of the Management Board	4
Condensed interim consolidated statement of comprehensive income	15
Condensed interim consolidated statement of financial position	16
Condensed interim consolidated statement of changes in equity	17
Condensed interim consolidated statement of cash flows	18
Notes to the condensed interim consolidated financial statements	19
Colophon	26
Disclaimer	28

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NX Filtration - Semi-annual Report 2023

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Report of the

Management

Board

This semi-annual report of NX Filtration N.V. (hereafter "NX Filtration" or the "Company") for the six months ended 30 June 2023 consists of the semi-annual report of the management board of the Company (the "Management Board"), including the responsibility statement by the Management Board, and the Condensed Interim Consolidated Financial Statements and the accompanying notes. All information included in this report is unaudited.

The Management Board hereby declares that to the best of its knowledge, the semi-annual report of the Management Board gives a fair view of the information required pursuant to section 5:25d sub 8-9 of the Dutch Financial Markets Supervision Act ("Wet op het financieel toezicht") and the Condensed Interim Consolidated Financial Statements as at and for the six months ended 30 June 2023, which have been prepared in accordance with IAS 34 - Interim Financial Reporting as adopted by the European Union, give a true and fair view of the assets, liabilities, financial position and profit of the Company and the undertakings included in the consolidation taken as a whole.

NX Filtration is listed on the regulated market of Euronext Amsterdam.

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Financial performance

Gross income was €3,737k in the first half year of 2023 compared to €3,692k in the first half year of 2022, representing a delay in revenue growth that is caused by longer lead times to convert pilot projects into large full-scale projects. This accounts for both pilot trajectories taking longer than anticipated, as well as longer lead times towards larger projects after the pilot phase amongst others caused by permitting lead times, decision making and engineering.

In our Clean Municipal Water business line, revenues were €1,427k in the first half year of 2023, compared to €1,180k in the first half year of 2022. This business line benefitted from various drinking water projects in Asia. In Europe major steps forward were made with several key OEMs (e.g. Veolia, Aqualia, Suez and Nijhuis Saur) who further intensified their pilot programs, entered into cooperation agreements with NX Filtration, and started offering

NX Filtration's products in full-scale projects.

In our Sustainable Industrial Water business line, revenues were €1,934k in the first half year of 2023, compared to €2,073k in the first half year of 2022. The focus in this business line remains on industries looking to reduce their water footprint and optimize their water systems in a sustainable way. The majority of revenues in this business line is currently coming from various OEMs across Europe.

Other income slightly declined from €439k in the first half year of 2022 to €376k in the first half year of 2023. This decline was driven by reduced government grants for innovation projects, partly offset by rental income from pilots growing from €231k in the first half year

Gross margin, EBITDA and net profit

Gross margin increased to 58.9% in the first half year of 2023 compared to 55.3% in the first half year of 2022, reflecting our strong technology position.

EBITDA loss was €5,310k in the first half year of 2023 compared to a loss of €3,936k in the first half-year of 2022. The EBITDA loss of the Company is mainly driven by investing in the organization ahead-of-the-curve to facilitate future business. Net loss amounted to €4,872k compared to a net loss of €3,989k in the first half year of 2022.

NX Filtration's medium-term objective is to realise a positive EBITDA margin by reaching a larger scale of operations and realizing purchasing benefits based on increasing volumes and optimising product design. NX Filtration's long-term objective is to realise an industry leading EBITDA margin based on benefitting from economies of scale, leveraging its fixed cost base as it realises its revenue growth and realising an increasing share of revenue from module replacements.

Finance and investments

Net cash position at 30 June 2023 amounted to €82.2 million, compared to €104.3 million at 31 December 2022. Net cash at 30 June 2022 decreased because of capital expenditures for the amount of €12.9 million and a negative operational cashflow for the amount of €9.6 million. The negative operational cashflow

is mainly caused by the operating loss and increased inventories to support future growth of the business.

Capital expenditure amounted to €12.9 million as compared to €8.1 million in the same period of 2022. Capital expenditures included investments in the ongoing construction of our new megafactory and further additions to NX Filtration's fleet of pilot systems. Solvency (equity divided by total assets) is 94% at the end of June 2023 compared to 95% at the end of December 2022. The high solvency rate is the result of the equity that NX Filtration raised at its IPO in June 2021 for, amongst others, investing in the further commercial rollout, innovation and expanding the production capacity with a new manufacturing facility.

The NX Filtration organization grew from

104 FTEs at 30 June 2022 (135 FTEs at 31 December 2022) to 159 FTEs at 30 June 2023.

Related party transactions

Transactions with related parties are disclosed in Note 14 of the condensed interim consolidated financial statements.

Principle risks and uncertainties

In our annual report for the financial year 2022 (which can be downloaded at www.nxfiltration.com/investors), we have extensively described certain risks and uncertainties, which could have a material adverse effect on our financial position

and results. We believe that the risks and uncertainties identified for the second half of 2023 remain in line with those that were presented in the aforementioned annual report.

Sustainability and ESG impact

Sustainability and a clear Environmental, Social and Governance (ESG) agenda are at the heart of NX Filtration's business. We passionately believe we have a responsibility to contribute positively to society and the environment.

In the first half year of 2023, Sustainalytics updated its independent ESG risk assessment on NX Filtration, ranking us amongst the 12% best performers in our global subindustry peer group compared to 13% in the previous year.

We continue to use our targeted ESG framework to address and monitor our impact along three pillars:

1. Clean water for all: Our membrane sales in the first half year of 2023 could enable the production of 93 billion liter of clean water1. In the first half year of 2023, NX Filtration enabled access to clean water across 22 countries.
2. Avoiding emissions at our customers: With our membrane module sales in the first half
   year of 2023, we enabled 2,305 ton CO2e savings during the deployment lifetime of our membrane modules, by avoiding the use of 4.3 million kg of chemicals and saving
   53 GWh energy compared to conventional technologies2.
3. Our internal initiatives: We have implemented various sustainability measures and initiatives around ESG related themes in our own operations, for our employees and our partners.

of 2022 to €271k in the first half year of 2023.

1. Based on NX Filtration's sales of 1,092 dNF and UF membrane modules multiplied by the expected capacity and lifetime of such modules
2. See Sustainability Chapter in the 2022 Annual Report for details, assumptions and methodologies

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Market developments and commercial roll-out

Market developments that benefit our direct nanofiltration technology have developed very favorably in the first half year of 2023. Driven by droughts and pollution, many countries are implementing new regulations and investment plans related to water. For example, in March 2023, France introduced 53 measures to share, reuse and save water. One of the objectives of this plan is to achieve 10% wastewater reuse by 2030, compared to less than 1% today. This represents nearly 1,000 projects in five years to recycle and reuse water. Also in March 2023, the US Biden-Harris Administration proposed the first-ever national drinking water standard related to PFAS. In May 2023 Spain announced a €2.2 billion package to alleviate drought impact, and in June 2023 Germany announced new limit values for PFAS in drinking water.

NX Filtration is actively working with its OEM partners on deploying its direct nanofiltration technology in, amongst others, the above- mentioned market trends. Pilots play an important role in this commercial roll-out strategy, that is based on converting pilot projects into larger demo or full-scale projects, with subsequent repeat orders from existing clients, and periodic module replacements at existing plants. In the first half year of 2023, NX Filtration initiated 104 pilot projects compared to 81 in the first half year of 2022. On 30 June 2023, NX Filtration had 186 pilot systems in its fleet, up from 162 at the end of 2022. Pilot projects continue the generate very positive

outcomes with our customers. In the first half year of 2023 we delivered our dNF modules for 3 demo projects and 8 full-scale projects, of which 4 were repeat orders from customers who had already worked with NX Filtration before.

We are particularly proud that we are making major steps forward with key OEMs across all geographies. In Europe, the largest OEMs (e.g. Veolia, Aqualia, Suez and Nijhuis Saur) further intensified their pilot programs with our technology, entered into cooperation agreements with NX Filtration, and started offering NX Filtration's products in full-scale projects. We also received follow-on orders from Belgian Water-as-a-Service company Ekopak. In Asia, we experience an increasing size of full-scale projects with large orders from e.g. Greentech in China and Hydroflux in Australia, who also entered into cooperation agreements with NX Filtration that form the basis for further roll-out of our technology. In the Americas, our sales team continued to plant the seeds with a focus on industrial and smaller municipal projects across North America, and various larger drinking water projects across Central and South America that have many similarities with the fast commercial roll-out we experience in Asia.

As a result of these favorable market dynamics, our increased pilot program and our traction with key OEMs, we see our pipeline of commercial opportunities further strengthening and growing, being today more than 50% larger than at the end of the first half of 2022.

New megafactory

We are fully on track with the construction of our new large-scale manufacturing facility. Last year, NX Filtration decided to upsize the design of this megafactory with a higher initial capacity and allowing more space for future capacity additions. Initial capacity is expected to be approximately 50k3 membrane modules per year, compared to approximately 10k4 membrane modules in our current facilities. We also anticipated for further capacity additions within the same facility, with a total targeted annual capacity of >120k5 membrane modules in addition to the existing capacity at the current locations.

ESG is strongly embedded in the design of this factory, with more than 400 solar panels for electricity generation, an extensive heat energy management and reuse system, and an inhouse water treatment facility. We are making strong progress on the construction, with completion of the new megafactory being anticipated

by the first quarter of 2024, and start-up during the first half-year of 2024 within the anticipated Capex budget.

Outlook

Our commercial roll-out strategy remains top priority in the second half year of 2023. We will continue our existing approach in which our global sales teams work with OEMs to roll- out pilot projects and convert these pilots into demo- and full-scale projects.

NX Filtration will increasingly be able to benefit from the ahead-of-the-curve investments

it has made. For example, over the past 1.5 years, we have expanded our global commercial organization from 18 to 42 FTEs, who are increasingly becoming effective in onboarding new OEMs, rolling out pilot projects and working towards converting these pilots into larger projects. Also in terms of our fleet of pilot systems, we have made ahead-of-the- curve investments, growing this fleet from

85 systems at the beginning of 2022 to 186 systems at the end of the first half year of 2023. Therewith we are nearing closely to our medium-term objective of 200 pilot systems, and therewith gradually shifting our focus from rapid expansion of our pilot fleet towards optimal deployment for near, medium and long- term commercial opportunities

2023 is a key year for the construction of our new megafactory. We are fully on track and completion of this megafactory is anticipated by the first quarter of 2024 and start-up during the first half-year of 2024. By then, we expect the additional capacity is needed to meet expected demand from our rapidly growing overall pipeline of opportunities for the medium term.

Our outlook on total revenues for 2023 is €10m to €14m, a substantial increase from €8.4 million in 2022. We are reiterating our medium- and long term objectives on revenue growth and profitability. The growth for the years

to come is further substantiated by strong building blocks that are in place: e.g. benefiting

1. Estimation, based on 5-shift production and depending on product mix
2. Estimation, based on 5-shift production and depending on product mix
3. Estimation, based on 5-shift production and depending on product mix

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