Klimator AB (publ)

Interim Report 3, July – September 2022

Third quarter July 1 – September 30, 2022

Group

• Operating income amounted to SEK 4,018K (SEK 2,025K)
• Operating profit amounted to SEK -7,109K (SEK -7,693K)
• Net profit after income taxes amounted to SEK -7,357K (SEK -7,722K)
• Net profit per share after income taxes amounted to SEK -0.47 (SEK -0.58)

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

Nine months January 1 – September 30, 2022

Group

• Operating income amounted to SEK 13,543K (SEK 9,851K)
• Operating profit amounted to SEK -21,671K (SEK -17,200K)
• Net profit after income taxes amounted to SEK -22,013K (SEK -17,338K)
• Net profit per share after income taxes amounted to SEK -1.42 (SEK -1.29)
• Cash flow from operating activities amounted to SEK -17,922K (SEK -11,012K)
• As of September 30, 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 first nine months

• 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 its Annual 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 holds its 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 solutions, which ZF will combine with additional information sources from the vehicle. The contract amount is confidential.
• In September, Klimator begins collaborating with 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.

  Material events after the end of the period

• 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 agreement with 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 23, the company announced that a rights issue of SEK 25 million will be carried out (see press release for detailed information).

Comment from the CEO

The company continues to run on all cylinders and meet its financial growth targets, growing income from January 1 – September 30 by 37% compared to the same period last year. In the 2022 fiscal year, we brought in around SEK 12 million in recurring income and have increased that figure by around 25% to date.

During the quarter, we expanded internationally, gaining a partner in the United Kingdom and signing a Proof-of-Concept agreement with ZF, one of the largest suppliers to the automotive industry.

We continue to strengthen our market-leading position in European smart winter road maintenance by, among other things, signing a 4-year contract with the Swedish contractor Terranor and closing contracts with several Danish municipalities. After the end of the second quarter, we also managed to extend the company’s current partnership agreements with the Finnish contractor Autori and the Swedish civil engineering company Peab. Last but not least, Mesta is now the first pilot customer in Europe to implement Klimator’s AHEAD techology. While AHEAD’s technology is primarily targeted at the automotive industry, it also has the potential to help deliver fully autonomous salt trucks. Mesta, which is already using Road Status Information (RSI) as an advanced decision-support and tracking system, is now adding AHEAD to evaluate and explore the concept of onboard, fully automated and dynamically calibrated winter road maintenance activities.

To ensure a high level of innovation within the company, we are continuing to invest in R&D. We currently have research and development projects going on in several different areas where the company’s technology and expertise in road climatology can open the doors to a number of exciting new applications. This includes projects in:

• Sustainable mobility solutions, where along with companies such as AFRY, NEVS, and CEVT, Klimator is presenting a road map on the commissioning and integration of autonomous electric mobility solutions in an urban environment.
• Wintertime road friction models for multi-lane roads – an innovation project with the Swedish Transport Administration and the Luleå University of Technology designed to enable reference measurements of road surfaces and friction on these roads.
• Weather forecast-based automated control of heated rail crossings to reduce electricity consumption on the rail network – on behalf of the Swedish Transport Administration.
• Autonomous airports, where Klimator is collaborating with Örnsköldsvik Airport and stakeholders such as Saab, Combitech, Luleå University of Technology, and RISE. The company’s proprietary technology is being used to map the landing strip down to the last detail in order to provide autonomous monitoring and measurement of friction at airports.

In order to continue our growth journey and strengthen the international expansion as well as the company's balance sheet, the board has decided to implement a capital acquisition of approx. SEK 25 million through a new issue with preferential rights for the company's shareholders.

Our target is to fully focus on promising new opportunities that will secure future growth for the company. To achieve this, we plan to focus on winning new Proof-of-Concept projects in the automotive industry while continuing to build and expand our international Winter Maintenance partner network and accelerate our geographic expansion.

Right now, our top priorities are to bring ongoing sales negotiations across the finish line and to welcome our two new R&D hires before we finally close the books on 2022!

Patrik Simson
CEO of 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

Klimator primarily operates in three market segments:

• Automotive
• Winter Maintenance
• Sensor Solutions

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

• Winter Maintenance & Sensor Solutions business area
• Automotive business area

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 Sensor Solutions product line gives 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-time. 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 same contractors that maintain roads in the winter also take care of public services, such as irrigation, lawn mowing, well servicing, etc., where the company’s sensors play a crucial role. Klimator therefore sees considerable potential in being able to offer new and existing customers a year-round turnkey solution in the form of data from these sensors.

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 (AD) technology

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 facilitate 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 systems 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. With the help of 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 Aps (hereinafter collectively referred to as “the company”). From January 6, 2021, Klimator Danmark is included in the group. The business was acquired from HedeDanmark via a transfer of DKK 550K.

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 the Danish subsidiary from activities in the Sensor Solutions business area.

The revenues also include project income from the development project with vehicle manufacturers in relation to the company’s Road Condition Data (RCD) and AHEAD products in the Automotive business area.

In the third quarter of 2022, net revenues amounted to SEK 3,302K, which is an increase of 61% compared to the prior year (SEK 2,048K).

The company’s revenues from Winter Maintenance are seasonal in nature. Data is delivered and revenues are realized during the months when the software is in use, i.e., primarily from October to April. Revenues from the sensor business are normally accrued evenly throughout the year since the business model typically entails a one-year subscription. Invoices and payments are normally 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 third quarter of 2022, the company capitalized SEK 527K of developmental expenses.

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 third quarter of 2022, Other operating income amounted to SEK 189K compared to SEK -23K 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 third quarter of 2022, direct costs amounted to SEK 1,361K (SEK 1,250K).

Other external costs

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

In the third quarter of 2022, Other external costs amounted to SEK 2,397K, which is an increase of 12% compared to the prior year (SEK 2,135K). The increase is primarily attributable to an increased number of marketing initiatives.

Compensation and benefits

At the end of the third quarter, the company employed 32 individuals in business management, sales/business development, administration, and product development/project management.

In the third quarter of 2022, compensation and benefits amounted to SEK 7,127K, which is an increase of 18% compared to the prior year (SEK 6,035K).

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 third quarter of 2022, the company’s depreciation and amortization amounted to SEK 242K (SEK 298K).

Other items

Intangible assets

At the end of the third quarter, the company’s intangible fixed assets amounted to SEK 2,479K, which included SEK 1,033K in capitalized developmental expenses, SEK 485K in patents, and SEK 961K 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 third quarter, the company had cash and cash equivalents of SEK 11,731K.

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

Cash flow

For the first nine months of the year, cash flow from operating activities amounted to SEK -17,922K (SEK -11,012).

Interest-bearing long-term debt

The company’s liabilities amounted to SEK 1,719K in the form of a loan from Almi Företagspartner. Of this amount, SEK 1,563K 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 156K.

In July, the company successfully carried out an Initial Public Offering of convertible notes at a nominal value of SEK 9,110,966 and an annual interest rate of 12%.

Equity

As of September 30, 2022, the equity of the group amounted to SEK  350K while the parent company’s equity amounted to SEK 2,980K.

Equity ratio

At the end of the third quarter, the group’s equity ratio was 2 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 9,110,966, was successfully completed. If fully exercised, this will result in a total of 1,401,687 new shares.

Number of shares in the company

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

At the end of the period, shares from Klimator’s current incentive plans (999,995 shares) and issued convertibles (1,401,687 shares) may increase the number of shares in the company by up to 2,401,682. If options from the remaining plans are fully exercised, the company’s total number of shares will amount to 17,909,766.

During quarter 1 to 3 of 2021, the average number of shares amounted to 12 950 000. During quarter 3 of 2021, the average number of shares amounted to 13 400 000 shares.
During quarter 1 to 3 of 2022 the average number of shares amounted to 14 454 042. During quarter 3 of 2022, the average number of shares amounted to 14 877 173 shares.

Profit per share

Profit per share for the second quarter amounted to SEK -0.59 (-0.49).

Auditor’s review

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

Next report

The next report is the company’s year-end press release about unaudited financial results in 2022 and Q4 2022, which will be published on February 28, 2023.

More detailed information about the company

The company’s prospectus, which can be downloaded from Klimator’s website, www.klimator.se, contains more detailed information about the company’s business and history.

For further information
Patrik Simson, CEO of Klimator AB
E-mail: patrik.simson@klimator.se
Phone: +46 (0) 70 283 77 65

Partner Fondkommission AB (phone 0046 31 761 22 30, www.partnerfk.se) is the company’s Certified Adviser on Nasdaq First North Growth Market.

Tags: