Interim Report 4, October – December 2022

Klimator AB (publ)

Financial Statement 2022

Interim Report 4, October – December 2022

Fourth quarter October 1 – December 31, 2022

Group

• Operating income amounted to SEK 8,121K (SEK 7,431K)
• Operating profit amounted to SEK -6,214K (SEK -5,545K)
• Net profit after income taxes amounted to SEK -6,530K (SEK -5,581K)
• Net profit per share after income taxes amounted to SEK -0.42 (SEK -0.36)

      (Amounts within parentheses refer to the corresponding figures for the same period               the prior year)

Full year January 1 – December 31, 2022

Group

• Operating income amounted to SEK 21,664K (SEK 17,282K)
• Operating profit amounted to SEK -27,885K (SEK -22,745K)
• Net profit after income taxes amounted to SEK -28,543K (SEK -22,919K)
• Net profit per share after income taxes amounted to SEK -1.84 (SEK -1.48)
• Cash flow from operating activities amounted to -20 120 (SEK -17,922K)
• As of December 31, 2022, the number of shares was 15,508,084 (13,400,000).

(Amounts within parentheses refer to the corresponding figures for the same period the prior year)

Material events during the year

• On January 14, Klimator wins a contract for smart winter road maintenance in Denmark valued at SEK 360K.
• In February, Klimator wins an additional contract for smart winter road maintenance in Denmark valued at SEK 500K.
• In March, a new patent application is submitted to PRV (the Swedish Intellectual Property Office) for road surface detection with LiDAR.
• At Örnsköldsvik Airport, Klimator delivers a presentation on proprietary technology that facilitates the efforts to establish and expand autonomous airports all across Sweden.
• Klimator enters into an autonomous driving collaboration with Scania. The value amounts to SEK 7M over four years.
• In April, Klimator gains SEK 5.1M in new funding through the exercise of options.

• In April, the company publicizes Innual Report for the 2021 fiscal year.
• In April, the company announces a new collaboration with Drive Sweden centered around a sustainable, automated transportation system.
• In April, one of the company’s patents for older technology is overturned in Europe.
• In April, the company publishes its Interim Report for the first quarter of 2022.
• In April, Klimator extends a contract for its Road Condition Data (RCD) service with a leading European supplier to the automotive industry.
• On May 13, the company hIits Annual General Meeting.
• In June, Klimator and Carmenta Automotive enter into a partnership centered around safe and effective connected vehicles and scalable autonomous driving.
• In July, the Board of Directors proposes a private placement of shares and convertible notes in the amount of SEK 14.8M to provide additional financing for the company’s international expansion. The board convenes an extraordinary meeting to approve the proposed new offering. The AGM approves the board’s proposal.
• In July, the company’s CTO resigns, and in August the company announces that a replacement has been appointed to the position.
• In July, Klimator signs a four-year contract for smart winter road maintenance valued at SEK 800K with Terranor.
• In July, Klimator announces that the company has been approved for listing on the NASDAQ Firth North Growth Market and will start trading on August 1.
• In August, Klimator enters into a partnership with the Royal Haskoning DHV consortium and signs a framework agreement with NDW, the National Road Traffic Data Portal of the Netherlands (“Nationaal Dataportaal Wegverkeer”).
• Klimator signs a partnership agreement with Rennicks Group to offer IoT weather stations for road traffic in the UK market.In September, Klimator begins collaborating with the Swedish Transport Administration and the Luleå University of Technology to facilitate wintertime road friction modeling on roads with multiple driving lanes. The project has a contract value of SEK 1.29M with a term of 2.5 years.
• In September, Klimator partners with ZF to support the innovation project InFusion. Klimator agrees to provide predictive, detective sIions, which ZF will combine with additional information sources from the vehicle. The contract amount is confidential.
• In September, Klimator begins collaboraIith yet another municipality on smart winter maintenance in Denmark and reinforces its leading position in the Northern European market. The total value of the order over the first year amounts to just in excess of SEK 500K, with subsequent annual income around SEK 200K.
• In October, in cooperation with its partner Autori, Klimator extends existing contracts and expands its business in Finnish winter road maintenance. The updated value of the contract amounts to SEK 700K for next winter alone.
• In October, Klimator and Peab sign a new 3-year contract for high-resolution road surface forecasts to ensure efficient operational management of winter roads in Sweden. The estimated annual value is around SEK 900K.
• In October, Klimator signs an agreemIwith Mesta A/S, which becomes the first pilot customer in winter maintenance in Europe to implement Klimator's product AHEAD. The order is initially worth SEK 1,500K and extends over three years.
• In November, the company announces that Mesta continues its digitization journey and becomes the first in Norway to invest in Klimator's IoT-based weather stations. Klimator receives an order for approximately SEK 600K
• On November 25, the company announced that a rights issue of SEK 25 million will be carried out (see press release for detailed information).
• On December 5, 2022, the subscription period in Klimator's rights issue begins and on December 20, the company announces that SEK 20 million will be added before costs.
• In December it was announced that Klimator is part of the "Roadmap" project for autonomous mobility.
• In December, it was announced that Klimator and the technology consultant Afry are starting a collaboration on slippery winter roads.
• In December it is announced that Klimator has contracted its first customer in the UK through its partner Rennicks. The project will install a number of IoT road weather stations for a local authority.
• In December, Klimator entered a four-year agreement with Mesta A/S in Norway for high-resolution road condition forecasts. The order is initially worth SEK 5 million, but more services and products may be added during the contract period.

Material events after the end of the period

• In January, Klimator became one of eight participants in MobilityXlab Batch 10. The program means that Klimator will work on creating future mobility solutions with MobilityXlab's industry partners CEVT, Ericsson, Polestar, Veoneer, Volvo Cars, Volvo Group, and Zenseact.
   
• In January, Klimator receives an order for the AHEAD sensor technology from a leading Japanese vehicle manufacturer. The order comes from an existing customer who now wants to continue the collaboration with Klimator after a successful evaluation project. The purpose of the contract is to integrate the technology into the vehicle manufacturer's development vehicles for motion control and driver assistance functions. The order value amounts to the equivalent of approximately SEK 800K.

Comment from the CEO

When we sum up 2022, it is not without a certain pride. We deliver a stable growth while consolidating our position as the market leader in Europe in smart winter maintenance obtaining strategic Proof-of-Concept projects with leading players in the automotive industry.

Financially, we deliver a revenue increase slightly over 25% and an approximately equal increase in our annual recurring revenue. The key to the stable growth and increase of our annual recurring revenue lies above all in the long and good relationships we have with our customers in winter maintenance. Given the market situation with the prevailing uncertainty in the economy, we enter 2023 with a healthy caution regarding our cost structure and continued growth. We do this by carefully following the economic situation and continuously reviewing the cost side of the company.

During 2022, we have carried out two rights issues of a total of approximately SEK 35 million and at the same time we changed marketplace to Nasdaq First North Growth Market in order to broaden the ownership.

Within our winter maintenance business area, our "customer retention" stays close to 100% and during the year we have expanded the customer engagement and signed longer contracts with our key customers. We are thereby consolidating our position as the market leader in Europe in smart winter maintenance while at the same time driving the digitization within the industry. The latest proof of this is the agreement we signed in the autumn with Mesta A/S in Norway, who will become our first pilot customer in winter maintenance in Europe, by implementing dynamic optimization of winter measures with our AHEAD technology. Furthermore, we deliver on our partner strategy and have during the year seen an expansion of that business in terms of new partners and the share of revenue generated via partners. Growth through partners occurs in two dimensions; partly through new partners in new markets and partly through more partners in existing markets.

Within our Automotive business area, we have had a good year, partly with new Proof-of-Concepts and partly with extended Proof-of-Concept projects, with leading OEMs and suppliers in the automotive industry. Awareness and knowledge of Klimator and our offering are also constantly increasing. The latest proof of this was at the beginning of this year when Klimator was selected one of eight participants (one of three Swedish companies) in the MobilityXlab Batch 10. In this program Klimator will work on creating future mobility solutions with MobilityXlab's industry partners CEVT, Ericsson, Polestar, Veoneer, Volvo Cars, Volvo Group, and Zenseact.

An interesting development we have seen in 2022, regarding the connection between our business areas winter maintenance and automotive, are the synergies and the scalability we have between our "predictive" and "detective" technologies in our product portfolio. The latest example is the agreement with Mesta A/S where our AHEAD technology, which was primarily developed for the automotive industry, will be used for dynamic winter maintenance. Another example is the airport project that we run as an innovation project together with Örnsköldsviks Airport and in collaboration with Saab, Combitech, Luleå University of Technology and RISE, where the AHEAD technology is used to map the runway in detail for autonomous friction measurement and monitoring at airports.

For 2023, we see a continued strong need and demand for digitization and efficiency in the winter maintenance industry, at the same time in the automotive industry, we see new regulations and the introduction of safety standards linked to risk of slipperiness on our roads. Regulations that have already started to be introduced in 2022. For both of these trends, Klimator is well positioned to both lead and contribute to this positive development in our industry.

Looking forward to and hoping for a year ahead where we move from a geopolitical uncertainty to a more stable environment, partly from an economic perspective, but above all from a human perspective, where peaceful and humanitarian solutions prevail.

Patrik Simson
VD för Klimator AB

About Klimator

History

Klimator is a Swedish software company that was founded in 2001 by Torbjörn Gustafsson and Jörgen Bogren. The founders have over 30 years of research experience in applied road climatology at the University of Gothenburg. Klimator’s technology is based on years of academic research into road weather conditions. In 2020, the company acquired HedeDanmark’s connected sensors (IoT) business to expand and strengthen Klimator’s product portfolio.

Business areas

To serve the market segments and customer groups addressed, Klimator’s activities are organized into two distinct business areas:

• Business Area Winter Maintenance
• Business Area Automotive

In the Winter Maintenance business area, the company offers a web-based software application, Road Status Information (RSI), based on the company’s Road Condition Data (RCD) platform. The software is customized for the needs winter contractors face when making critical decisions about when and how to implement specific measures and how much salt or sand to lay down. Klimator’s software results in significant cost savings for an industry with annual revenues of around SEK 3 billion in Sweden alone. More efficient wintertime road maintenance also brings major environmental benefits, such as lower salt usage, lower fuel consumption, and less wear and tear on roads.

The company’s IoT sensors give contractors, municipalities, and other organizations the ability to measure road surface temperature, air temperature, air humidity, rainfall, ground moisture, groundwater level, water level, and hydraulic flow in real-timI. With the help of sensors, data is collected and stored in Klimator’s IoT platform, where customers can avail themselves of a number of different services. For the customer, it’s a simple and easy introduction to a more modern, digital way to work.

The company focuses on IoT sensors connected to winter road maintenance, but offers other sensors as a service to existing customers.

After establishing the Automotive business area late in 2019, the company carried out a number of successful Proof of Concept (PoC) and developmental projects with leading European and Japanese vehicle manufacturers and suppliers. There are several highly attractive areas of application for the company’s data platform (RCD) and sensor technology (AHEAD) within the automotive industry with respect to:

• improved driver information
• improved use of Advanced Driver Assistance Systems (ADAS)
• safe and scalable Autonomous Driving technology (AD)

Product portfolio

Road Condition Data (RCD) is a cloud-based Data-as-a-Service platform (DaaS) that aggregates data from a number of different sources. Advanced climate models and Klimator’s unique classification model for the road network are used in tandem to process this data and deliver detailed real-time information and predictive forecasts about road weather conditions. This information can be applied in a number of different areas in the automotive industry, including intelligent Advanced Driver Assistance Systems (ADAS) and complex systems for autonomous vehicles (AD).

Based on RCD, Road Status Information (RSI) is a digital Software-as-a-Service (SaaS) application that provides detailed forecasts for roads, bike paths, and pedestrian walkways. These high-resolution forecasts are used by transportation agencies and winter road contractors to make critical decisions about when, where, and how to implement snow removal and de-icing measures. Klimator’s forecasts facilitate decision-making, planning, and follow-up and Ilitate more efficient use of resources, which results in significant cost savings and a lessened impact on the environment.

AHEAD is a sensor technology that analyzes road conditions and friction in front of a moving vehicle in real-time. The technology is the result of more than ten years of research and development into road condition classification. AHEAD gives vehicle system information about prevailing road conditions, which improves the functionality and utility of Advanced Driver Assistance Systems and Autonomous Driving technology.

Connected sensors – Klimator offers a wide range of connected sensors that measure, among other things, groundwater levels, lake and reservoir levels, storm drains inside wells, weather stations for winter roads, ground moisture, and passenger flows. WiIh the help oI sensors, data is collected and stored in Klimator’s IoT platform. The customer can perform a number of different functions in the platform, such as configure alarms, analyze data, create Power BI-based reports, or perform API-based data queries for their own internal systems. Klimator’s IoT solutions do not need a power source or Internet connection but are designed to run on batteries and connect via a network such as, for example, NBIOT or Sigfox.

Financial overview

Consolidated financial statements

The Interim Report relates to the group, where the parent company, Klimator AB, owns 100 percent of the shares of Klimator Danmark DK ApS (hereinafter collectively referred to as the “company”).

Accounting principles

The Interim Report has been prepared in accordance with the Annual Accounts Act (“Årsredovisningslagen”) and the BFNAR 2012:1 Annual accounts and group accounting (“K3”) general guidance from the Swedish Accounting Standards Board (BFN).

Income

Revenues

The company’s revenues primarily consist of licensing income for the Road Status Information service in the Winter Maintenance business area and income via IoT sensors.

The revenues also include project income from the Automotive business area regarding Proof-of-Concept and innovation projects with vehicle manufacturers, in relation to the company’s products Road Condition Data (RCD) and AHEAD.

In the fIh quarter of 2022, net revenues amounted to SEK 7,551K, which is an increase of 5% compared to the prior year (SEK 7,216K)

The company’s revenues from Winter Maintenance, now also including the sensor business, are normally accrued evenly throughout the year since the business model typically entails a one-year subscription.  In addition to this, the company normally charges a start-up fee. Invoices and payments are often sent or received in advance.

Capitalized developmental work and proprietary fixed assets

The company capitalizes expenses attributable to the mapping of new geographic areas in its data platform.

In the fourth quarter of 2022, the company capitalized SEK 48K of developmental expenses.

The company has a significant cost for the use of servers and data traffic. During the beginning of 2023, development work will begin to make this more efficient, in order to reduce the company's running costs.

Other operating income

The company occasionally receives research and development grants from authorities such as the EU and Vinnova that are reported as Other operating income.

In the fourth quarter of 2022, Other operating income amounted to SEK 522K compared to SEK 215K for the same period the prior year.

Costs

Direct costs

Cost of sales primarily refers to data traffic, server capacity, and hardware costs associated with the sale of sensors and AHEAD systems.

In the fourth quarter of 2022, direct costs amounted to SEK 2,712K (2,641K).

Other external costs

Other external costs primarily include rental costs for the premises, IT services, marketing, travel and consulting fees.

In fourth quarter of 2022, other external costs amounted to SEK 3,585K, which is an increase of 54% compared to the prior year (SEK 2,326K). The increase is primarily attributable to an increased number of marketing initiatives, as fairs, customer activities and development of the digital marketing.

Compensation and benefits

At the end of the fourth quarter, the company employed 30 individuals in business management, sales/business development, administration, and product development/project management.

In the fourth quarter of 2022, compensation and benefits amounted to SEK 7,793K, which is in line with the same period previous year.

Depreciation and amortization

The company amortizes the goodwill from the acquisition of the Danish business and OmniKlima (merged subsidiary) as well as capitalized development expenses over a period of 5 years.

In the fourth quarter of 2022, the company’s depreciation and amortization amounted to SEK 245K (SEK 456K).

Other items

Intangible assets

At the end of fourth quarter, the company’s intangible fixed assets amounted to SEK 2,303K, which included SEK 992K in capitalized development, SEK 440K for patents and SEK 871K in goodwill.

The acquisition cost of an internally developed fixed asset includes all directly related expenses.

Intangible fixed assets are linearly depreciated over the estimated useful life of the asset, which is reassessed on each balance sheet date. Currently, the useful life is estimated at five years for all intangible fixed assets.

Cash and cash equivalents

At the end of the fourth quarter, the company had cash and cash equivalents of SEK 22,630K.

The company also has an unused bank overdraft facility of SEK 3,000K.

Cash flow

For the year, cash flow from operating activities amounted to -20 120 (SEK -17,922K).

Interest-bearing long-term debt

The company’s liabilities amounted to SEK 1,563K in the form of a loan from Almi Företagspartner. Of this amount, SEK 938K is long-term debt. The loan was assumed in spring 2020 in connection with the COVID-19 pandemic. The loan has a term of 60 months and an annual interest rate of 4.64 percent. Repayment of the principal began in August 2021.

The company has an unused bank overdraft facility of SEK 3,000K at Nordea, with an annual administration fee of 1.5 percent and an interest rate on any withdrawn amount of 2.95 percent.

Interest-bearing short-term debt

The short-term portion of the loan from Almi Företagspartner amounts to SEK 625K.

In July 2022, the company successfully carried out an Initial Public Offering of convertible notes at a nominal value of SEK 9,111Kand an annual interest rate of 12%.

In connection with the company's rights issue in December 2022, debentures were converted to a value of SEK 2,753K and the debt thus amounts to SEK 6,357K at the end of the year.

Equity

As of December 31, 2022, the equity of the group amounted to SEK 10,423K while the parent company’s equity amounted to SEK 13,285K by December 31.

Equity ratio

At the end of the fourth quarter, the group’s equity ratio was 28 percent.

Stock-based incentive plans

At the Annual General Meeting (AGM) on February 19, 2020, a resolution was passed to issue options that will increase the number of shares by 499,995 in 2023 if fully exercised.

At the AGM on May 18, 2021, shareholders approved an additional incentive plan (TO3) that will increase the number of shares by 500,000 in 2024 if all vested options are fully exercised.

Convertible notes and new share issue

In July, an Initial Public Offering of 1,261,822 shares and convertible notes, with a nominal value of SEK 9,111K, was successfully completed.

In December, the company carried out a rights issue of 10,416,667 shares, the shares were registered at the Swedish Companies Registration Office in January 2023.

Number of shares in the company

At the end of the fourth quarter 2022, Klimator had 15,508,084 shares outstanding, compared to 13,400,000 shares outstanding in the corresponding period the prior year.

After the registration of the shares from the rights issue in January 2023, the number of shares in the company amounts to 25,924,751.

During quarter 1 to 4 of 2021, the average number of shares amounted to 12 950 000. During quarter 4 of 2021, the average number of shares amounted to 13 400 000 shares.

During quarter 1 to 4 of 2022 the average number of shares amounted to 14 454 042. During quarter 4 of 2022, the average number of shares amounted to 15 508 084 shares.

Profit per share

Profit per share for the fourth quarter amounted to SEK -0.46 (-0.36).

Auditor’s review

This Interim Report has not been reviewed by the company’s auditor.

Dividend
 

The board proposes that no dividend be paid for 2022.

Date for annual report 2022 and general meeting 2023.

The annual report is published on 24 April and will be available on the company website.

The general meeting will be held on May 24 at 13:00 at the company's headquarters.

Next report

The next report is the company's interim report Q1, which will be published on 31 May 2023.

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