Modelon AB Year-end report Q4 2021

Q4 Highlights

• Annual Recurring Revenue increased to MSEK 37.0 (28.3), with continued quarter-to-quarter growth of 8%. Modelon Impact ARR grew 39% compared to the previous quarter and was the major contributor to overall ARR growth
• Net revenue amounted to MSEK 15.8** (28.8), of which software revenues were MSEK 9.6 (8.8)
• EBIT amounted to MSEK -12.1 (3.2)
• Net result amounted to MSEK -1.2 (2.2)
• Earnings per share amounted to SEK -0.11 (0.29) before dilution
• Financial result for the period reflects the ongoing investment phase for accelerated growth

2021 Highlights

• ARR* increased to MSEK 37.0 (28.3), an annual growth of 31%
• Net revenue amounted to MSEK 68.9** (112.4), of which software revenues were MSEK 36.4 (36.3). FX adjusted software revenue increased by MSEK 2.2, with 6% volume growth
• EBIT amounted to MSEK -39.4 (4.5)
• Net result amounted to MSEK -28.5 (3.3)
• Earnings per share amounted to SEK -2.59 (0.43) before dilution

Comments from the CEO
ARR growth on track
We are pleased to report that fourth quarter sequential ARR growth remained steady at 8%, which is the same growth rate as in the two preceding quarters. The 2021 ARR annual growth rate amounted to 31%, dominated by the second to fourth quarters. With the 2021 year-end ARR of MSEK 37.0, we remain firmly on track towards the financial target of MSEK 100 ARR in 2024.
Growth continues to be driven by our “land and expand” strategy and new Modelon Impact accounts. New customer wins and initial Modelon Impact license purchases during the fourth quarter include the following:

• Japanese mobility conglomerate
• European automotive OEM
• Global automotive Tier 1 supplier
• German fuel cell system innovator
• Global appliances manufacturer
• Global energy equipment conglomerate
• Two national research laboratories in the USA

Common among these customers is that their functional and technical demands are at the most rigorous level in industry, and they have recognized that Modelon is able to meet these demands. They are also leaders in their segments regionally and, in many cases, globally. They all offer the potential for meaningful future expansion in terms of additional license sales.
We continue to see Modelon Impact being used in a variety of clean technology applications in our core target industries: automotive, energy, aerospace, and industrial equipment. One illustrative example is Heliogen, a U.S. renewable energy technology company backed by Bill Gates. The company is developing a concentrated solar power solution to deliver low-cost renewable energy in the form of heat, power, or hydrogen fuel. Heliogen is using Modelon Impact’s built-in thermal systems models for performance computations and detailed technical investigations of their concentrated solar thermal energy plants for engineering decision making.
In the quarter we also saw upsell and migration to Modelon Impact among existing customers. The U.S. aerospace company that, as reported, purchased its first Modelon Impact licenses during the third quarter 2021 increased its license count by more than 7x during the fourth quarter and is now one of our largest Modelon Impact accounts. The account offers further evidence that the most demanding customers in industry trust Modelon to deliver outstanding simulation solutions, and our commitment to their success is helping drive our growth.

Investing in product development and commercial progress
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 from customer co-funding to self-funding is reflected in the increase of development costs of 52% in 2021, and of 72% in the fourth quarter when the change has full effect. The co-development financing ended during Q2 2021 and will therefore affect financial comparisons through Q2 2022, after which investors will more clearly be able to compare revenues and development costs on a like-for-like basis.

Modelon Impact release 2022.1
The fourth quarter has seen intense development activity for the Modelon Impact 2022.1 release announced after the close of Q4 2021, on February 21, 2022. This release includes substantial new features and improvements, including an expanded online Help Center to facilitate user onboarding and self-training, which will help support our customers and drive further growth.

“Modelon Innovate” user conference announced
With Modelon Impact firmly established in the global simulation market, we have announced our first Modelon user conference for an international audience. The conference is planned for October 19-20, 2022, in Stockholm. We are inviting customers to present their stories about how they use Modelon's system simulation solutions and are pleased to have preliminary commitment from renowned industry leaders such as NASA Jet Propulsion Laboratory, Volvo Autonomous Solutions, Newcastle Marine Services, and Oak Ridge National Laboratory. We expect a vibrant exchange of experiences among customers covering diverse application areas such as electric mobility, clean energy, hydrogen fuel cell technologies, and many others.

Thought leadership in simulation
Thought leadership and advancing the state of the art in system simulation is a pillar of Modelon's vision. Our Chief Solutions Officer Hubertus Tummescheit presented “Decarbonization through Systems Simulation” at the International CAE Conference in Vicenza, Italy in November, describing innovative ways Modelon tools can be used to promote a cleaner, carbon-free automotive industry. Also in November, Modelon was highlighted in ITEA Magazine for its leadership in digital engineering and industrial software innovation. In December, we published a blog post on our corporate website describing the unique work combining Modelon Impact with the DeepSim platform from minds.ai, connecting Modelon's simulation work with the latest in artificial intelligence.

We enter 2022 with a consistently high growth rate and ambitious goals to continue our growth and SaaS journey with Modelon Impact. We are thrilled that the most demanding customers in industry are selecting Modelon Impact, which continues to pioneer cloud-based system simulation. We are confident that we can continue to capture the vast market opportunity before us and welcome you to join our growth journey.

Magnus Gäfvert, CEO Modelon
Lund, March 4, 2022

Investor presentation
Modelon invites to presentation of Q4 year-end report at 10am CET on March 4, 2022. CEO Magnus Gäfvert and CFO Jonas Eborn will present the Q4 and 2021 earnings in an audiocast: https://tv.streamfabriken.com/modelon-q4-report-2021/register.

Complete Q4 year-end report is attached to this press-release and is also made available on the company webpage: www.modelon.com/investor-relations.