Q2 Highlights

• ARR increased to MSEK 41.1 (33.2), an annual growth of 24%.
• Net revenue amounted to MSEK 15.1 (18.4), software revenues increased to MSEK 10.5 (8.8)
• EBIT amounted to MSEK -17.5 (-9.7), including development costs of MSEK 14.2 (12.4).
• Net result amounted to MSEK -17.5 (-9.9).
• Earnings per share amounted to SEK -1.59 (-0.90) before dilution.
• Financial result for the period reflects the ongoing investment phase for accelerated growth

Comments from the CEO
Continued ARR growth
Annual recurring revenues in the second quarter of 2022 grew 24% compared to Q2 2021. Software revenues in the quarter increased 19% compared to 2021 and comprise 70% of the total revenue vs. 48% in 2021. This development illustrates the strategy shift towards a product business centered around our flagship cloud solution Modelon Impact, supported by our professional services offering with the ambition to grow our annual recurring revenues to 100 MSEK in 2024.
Notable new customer wins during the second quarter include:

• Japanese engineering company
• Japanese automotive global leader
• Japanese multi-national electronics company
• Korean CAE solution provider
• Japanese international machinery company
• Japanese high precision mold manufacturing company
• European global energy technology company
• US global automatic door provider
• Chinese manufacturing company
• US green aviation innovator
• US carbon neutral fuel innovator
• US global automotive company
• European global aerospace company

We continue to be pleased by the adoption of Modelon Impact by leading technology innovators across multiple industries. Business activities in the quarter were solid in all target territories in Europe, North America and Asia, including several notable wins in Japan.
A fine example of how Modelon Impact enables competitive innovation of revolutionary technology was published during the quarter in collaboration with the European company Lightyear, which is adopting Modelon Impact in the development of the solar electric vehicle Lightyear 0. Lightyear 0 significantly reduces the consumption of grid energy compared to current electric vehicles. Lightyear chose Modelon Impact to make quicker and smarter product development decisions, and because of the ready-to-go and validated physical models built into the platform.
Further industry testimonials on Modelon Impact will be presented at Modelon Innovate in Stockholm on October 19-20.

Solid sales pipeline activity
Sales pipeline activity continued to be solid in the quarter. Lead generation for Modelon Impact has almost doubled vs. Q2 2021, driven by marketing activities and with an increasing number of upsell opportunities.
In the second quarter this included a stream of digital content as well as on-site presentations at The Electric & Hybrid Aerospace Technology Symposium in Frankfurt, and at the ASME (The American Society of Mechanical Engineers) Turbo Expo in Rotterdam by our industry experts and business developers. Modelon Chief Solutions Officer Hubertus Tummescheit hosted a seminar on “Democratization of Engineering Simulation” at the ASSESS 2022 Congress “Leading the Revolution in Simulation” in Atlanta during May. These kinds of content presentations help Modelon retain and enhance our thought leadership in the industry while also driving sales leads.

Accelerating cloud scalability
Modelon Impact 2022.2 was successfully released at the end of the quarter. The release contains significant improvements in cloud scalability for SaaS, improved built-in workflows, and model library contents for key industry applications. We are continuously focusing our R&D towards increasing the addressable market for Modelon Impact, and this release is a testament to that.

Investing in growth
Our growth investments in product and commercial activities are, since the third quarter 2021, fully self-funded with all product development costs expensed. In the period from 2018 through the first half of 2021, the early development of Modelon Impact was co-funded in partnership with a U.S. enterprise customer, with the customer funding recognized as services revenue. The planned strategic shift to self-funding is reflected in a 39% increase in development costs in the trailing twelve-month period. After Q2 2022, investors will more clearly be able to compare revenues and development costs on a like-for-like basis.
Service revenues in Q2 are affected by some delayed and reduced projects with European customers because of uncertainties attributed to the war in Ukraine and its consequences. These effects on our services business are expected to be temporary, and the pipeline for coming quarters is healthy.
We are pleased to see our team in India growing. During the quarter we inaugurated a new, expanded office in Trichy. For the first time since the Covid pandemic we were also able to gather our global team in Sweden for three intensive days of team building and innovation, aligning for the next step on our growth journey.

While we are deeply concerned by the war in Ukraine and geopolitical and global economic developments, we remain fully confident in our business and goals. System simulation is a key component in addressing a range of global challenges with new technology and innovation, and for technology enterprises to be competitive in this environment, as confirmed by the market response we receive and the resulting pipeline development. We look toward the coming quarters with continued confidence.

Magnus Gäfvert, CEO Modelon
Lund, August 24, 2022

Investor presentation
Modelon invites investors to a presentation of the Q2 interim report at 10am CET on August 24, 2022. CEO Magnus Gäfvert and CFO Jonas Eborn will present the Q2 earnings in an audiocast: https://tv.streamfabriken.com/modelon-q2-report-2022.

The complete Q2 interim report is attached to this press release and is also made available on the company webpage: www.modelon.com/investor-relations.