Modelon AB Interim report Q2 2026

Quarter, April - June

• ARR amounted to MSEK 45.9 (53.1), an annual decrease of 14%.
• Net revenue amounted to MSEK 16.6 (18.5), of which software revenue was MSEK 12.1 (14.4).
• Cash flow from operations amounted to MSEK -7.6 (-14.6).
• Adjusted EBIT amounted to MSEK -4.4 (-9.4).
• Operating expenses were MSEK 21.4 (33.2), including non-recurring items of MSEK 0.0 (5.2) and development costs of MSEK 7.1 (10.5).
• Net income after tax amounted to MSEK -4.3 (-14.6).
• Earnings per share amounted to SEK -0.24 (-0.85) before dilution.

Period, January - June

• Net revenue amounted to MSEK 31.9 (38.9), of which software revenues were MSEK 24.2 (29.6).
• Adjusted EBIT amounted to MSEK -11.6 (-17.7).
• Operating expenses were MSEK 45.1 (62.8), including non-recurring items of MSEK 0.5 (5.2).
• Net income after tax amounted to MSEK -12.1 (-23.7).
• Earnings per share amounted to SEK -0.66 (-1.37) before dilution.

Comments from the CEO

Business update
The second quarter of 2026 showed continued reduction of operating losses, a return to growth in services, and major product launches in Physical AI, while software revenue was affected by earlier license churn. Net revenue amounted to MSEK 16.6, a decrease of 10 percent compared with last year. Software revenue was MSEK 12.1 (-16 percent) while services amounted to MSEK 4.4 (+10 percent). Currency effects contributed MSEK -0.6 to the revenue change from last year. The year-over-year decrease in software revenue reflects churn among software licenses customers with temporary projects and single users, while long-term customers with several users are stable and show high satisfaction with our products and services. The growth of services in the second quarter is a positive trend shift, indicating that our offering is better aligned with customer demand.
Annual Recurring Revenue (ARR) was MSEK 45.9 (-14 percent), a decrease attributable to the loss of license subscriptions among some customers in recent quarters. New business in Q2 2026 included contracts with several Korean customers: KIA Corporation increased Vehicle Dynamics subscriptions, Hanon Systems - a multinational automotive supplier - introduced Modelon Impact as a system simulation platform, and a large Korean power company acquired Thermal Power Library licenses.
EBIT in Q2 2026 was MSEK -4.4, an improvement of MSEK 5.0 compared with the adjusted result for the same quarter last year (+MSEK 10.2 versus the reported result, which included one-off items of MSEK 5.2). We have reduced operating losses consistently over the last six quarters, thanks to increased operational efficiency and cost reductions. Operating cash flow in Q2 2026 was MSEK -7.6, MSEK 7.0 better than last year, thanks to an improved operating income.
Modelon has been awarded a grant from Sweden’s innovation agency Vinnova for a research project in AI data center cooling simulation and validated digital twins, together with Research Institutes of Sweden (RISE) and several other leading companies in the area. The project will run for 36 months, starting in September 2026. Modelon’s part of the project funding is MSEK 4.3.

Physical AI
Physical AI describes the next frontier of generative AI, where the technology is used in combination with domain knowledge, data, and workflows to address real-world industrial problems. Modelon is exceptionally well positioned for this emerging area, thanks to a strong legacy in physics-based simulation, a broad portfolio of application libraries, and a customer base spanning the HVAC, Energy, Automotive, and Aerospace industries.
During the second quarter, we announced two major releases and several minor updates introducing new AI functionality. The integrated AI assistant provides an easy-to-use, multilingual interface, powered by capabilities to plan, execute, and analyze advanced system simulations. We have based our implementation on the Model Context Protocol (MCP), an open industry standard, which creates flexibility for integration with best-of-breed AI services and language models. Modelon’s Physical AI implementation has an efficient way of building simulation models, compared with a pure AI approach based on measurement data and neural networks. Together with the open Modelica standard for physics-based system modeling, we provide unique opportunities for customers to add their own skills and know-how, on top of industry-grade libraries and ready-to-use workflows in Modelon Impact.
The AI assistant works on our simulation models, including the Data Center library, which was released during June. This new library represents a significant step into the growing market of cooling and energy systems for high-capacity data centers, built for AI workloads. The library contains models for liquid-cooled racks of GPUs, as well as key data center components such as coolant distribution units (CDU), computer room air handlers (CRAH), chillers, and cooling towers. We provide generic components as well as validated supplier-specific models. Executable reference systems for entire data centers are included as starting points for suppliers and integrators who want to explore design alternatives and optimize the resource utilization of an existing data center.
We expect AI functionality in combination with simulation libraries to support revenue growth through faster adoption of simulation software and through additional business models, such as consumption-based pricing. We will continue to drive innovation in Physical AI, investing in feature updates and frequent product releases.

Outlook
We expect ARR growth in the second half of the year, based on a growing sales funnel as well as business opportunities created by new AI features and simulation libraries.
Operating income has improved since H2 2024, albeit at a slower rate than needed to reach cash flow break-even in 2026. We expect further profitability and cash flow improvements through growth of recurring software revenues, leading to positive cash flow from Q1 2028. Multi-year deals and additional research grants could further accelerate our path to positive cash flow.

Jan Häglund, CEO Modelon
Lund, July 21, 2026

Investor presentation
Modelon invites investors to a presentation of the Q2 interim report at 10.00am CET on July 21, 2026. CEO Jan Häglund and CFO Jonas Eborn will present the Q2 earnings in a webcast.

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