Klimator AB (publ) Interim Report 1, January – March 2023

First quarter January 1 – March 31, 2023

Group

• Operating income amounted to SEK 7,520K (SEK 5,594K)
• Operating profit amounted to SEK -5,567K (SEK -6,052K)
• Net profit after income taxes amounted to SEK -5,825K (SEK -6,135K)
• Cash flow from current operations amounted to SEK -6 425K (-807K)
• Number of shares as of March 31st amounted to 28 824 751 (13 400 000)
• Net profit per share after income taxes amounted to SEK -0.20 (SEK -0.46)

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

Material events during the first three months

• In January, Klimator becomes one of eight participants in MobilityXlab Batch 10. The program means that Klimator will work on creating future mobility solutions together 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.
• In March, the company carried out a directed rights issue of SEK 5,800K to a new strategic investor.
   

Material events after the end of the period

• In April, Klimator launches a camera function on its IoT Road Weather Stations. The product has been developed at the company's development department in Odense, Denmark, where Klimator has its foremost experts in IoT solutions.
• In April, Kelių Priežiūra and Klimator sign a partnership agreement for dynamic winter road maintenance concepts towards the Baltic countries. The agreement includes services and products from Klimator's product portfolio such as Road Status Information (RSI) in combination with the IoT based road weather stations.
• In April, Klimator signs an agreement with another municipality in Denmark on smart winter road maintenance. The total order value for a three-year period is approx. SEK 850K.
• In April, Mitsubishi Electric Automotive America (MEAA) unveils its 2023 flagship and demonstration vehicle, which includes the latest technology innovations. One of these is Klimator's solutions for predictive and detective information about road weather conditions.
• In May, Klimator signed a contract with one of the largest municipalities in Denmark for a complete set of road weather stations and monitoring software for making call-out decisions on roads and bicycle lanes. The total order value for the first year is approx. SEK 600K.

Comment from the CEO

2023 has started solidly and we continue to consolidate our position as the market leader in Europe for smart winter road maintenance. We end the quarter with a revenue increase of approx. 34%, where the major part of the growth is within the Winter Maintenance business area.

During the month of March, we have arranged Winter Conference seminars in Jönköping, Sweden, and Odense, Denmark, with a total of approx. 150 participants from our customers, potential customers and our partners. In connection with the event in Odense, we also launched our new IoT Road Weather Station with camera, which received a very positive response and which, at the time of writing, has already generated business with a couple of new municipalities in Denmark. The camera is delivered either as a complement to the existing IoT Road Weather Stations in operation or as an option to our IoT Road Weather Station.

We continue to execute on our partner strategy and welcome Kelių Priežiūra to the family as a new partner. The agreement covers concepts for dynamic winter road maintenance towards the Baltic countries and the service includes Klimator's Road Status Information (RSI) in combination with our IoT-based road weather stations. Kelių Priežūra is an experienced winter maintenance operator and has been a customer of Klimator for several years. Connected to our expansion plans and partner strategy, during the month of April we were at the Snow Conference trade show in Omaha, US. The US is a large market with great potential for our offering, where we clearly see that Klimator is at the forefront of digitization and efficiency in smart winter road maintenance.

On April 28th, we were finally able to announce our partnership with Mitsubishi Electric Automotive America (MEAA) and their 2023 flagship and demonstration vehicle, which includes Klimator's solutions. Over the past year, we have worked closely with MEAA's Filament Labs team to integrate Klimator's proactive weather information solutions into the new concept car. With MEAA's demo car, the latest technology is showcased to car manufacturers around the world at private events and at trade shows. The first public trade show is Auto Tech in Detroit, USA on June 7-8.

As is well known, the world economic situation is still relatively uncertain and we generally experience a moderate willingness to make investments. However, we see differences between our two business areas, where the Winter Maintenance business is more resilient, with an increasing demand for our services and products connected partly to the digitization of the industry and partly to the savings potential. The savings potential comes in two dimensions, partly in monetary terms and partly as environmental gains. Given the economic situation, we also act with a certain amount of caution by carefully following the economic development and continuously reviewing the cost side of the company.

In the next few months before the summer arrives to Sweden, a busy time follows. On the one hand, we are entering a period where the development work is intensified before the next "winter road maintenance season" and on the other hand, we will be participating in several trade shows in the US and Europe, both for the automotive industry and for the winter maintenance. Industry. And it all boils down to maintaining our market position at the technological and digital forefront and to expand and strengthen our presence on new markets!

Patrik Simson
VD för Klimator

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.

Klimator’s IoT Road Weather Stations provides real-time information on how weather impacts local road conditions. This data will empower operators to make informed decisions on the appropriate treatments necessary. The data is easily accessible from the Road Status Information (RSI) platform. The data comes in the form of an API so can also be fed into other weather monitoring and forecasting systems if necessary.

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 total turnover increases by 34% to SEK 7,520K for the first quarter of 2023, compared to the same period in 2022 (SEK 5,594K).

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 first quarter of 2023, net revenues amounted to SEK 6,550K, which is an increase of 26% compared to the prior year (SEK 5,185K). The increase is mainly attributable to the fact that the company has increased its recurring revenue (ARR) compared to 2022.

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.

The company has a significant cost for the use of servers and data traffic. During the beginning of 2023, development work was initiated to make this more efficient, with the aim of reducing the company's running costs.

In the first quarter of 2023, the company capitalized SEK 144K of developmental expenses for the above-mentioned projects.

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 first quarter of 2023, Other operating income amounted to SEK 826K compared to SEK 409K for the same period the prior year, which is an increase of 102%. The increase is mainly attributable to the collaboration with Scania, regarding autonomous (self-driving) vehicles.

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 first quarter of 2023, direct costs amounted to SEK 2,414K (1,226K). The increase is mainly attributable to initial hardware costs incurred when selling to new customers.

Other external costs

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

In the first quarter of 2023, other external costs amounted to SEK 2,536K, which is an increase of 19% compared to the prior year (SEK 2,133K). The increase is primarily attributable to an increased number of marketing initiatives, such as fairs, customer activities and development of the digital marketing. It is, however, a significantly reduced cost (SEK 3,585K) compared to the fourth quarter of 2022, when the company now hires consultants to an ever-smaller extent.

Compensation and benefits

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

In the first quarter of 2023, compensation and benefits amounted to SEK 7,934K, 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 first quarter of 2023, the company’s depreciation and amortization amounted to SEK 203K (SEK 309K).

Other items

Intangible assets

At the end of the first quarter, the company’s intangible fixed assets amounted to SEK 2,331K, which included SEK 1086K in capitalized development, SEK 466K for patents and SEK 779K 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 first quarter, the company had cash and cash equivalents of SEK 20,714K.

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

Cash flow

For the first quarter, cash flow from operating activities amounted to SEK -6 425K (SEK -807K).

Interest-bearing long-term debt

The company’s liabilities amounted to SEK 1,405K in the form of a loan from Almi Företagspartner. Of this amount, SEK 937K 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 468K.

In July 2022, the company successfully carried out an Initial Public Offering of convertible notes at a nominal value of SEK 9,111K and 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, which is unchanged during the first quarter of 2023.

Equity

As of March 31st, 2023, the equity of the group amounted to SEK 9,930K while the parent company’s equity amounted to SEK 13,001K by March 31st.

Equity ratio

At the end of the first quarter, the group’s equity ratio was 31 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. The option program has not been exercised given the relationship to the current share price at the time of redemption.

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 2022, 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 2022, 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.

In March 2023, a directed rights issue of 2,900,000 shares was carried out.

Number of shares in the company

At the end of the first quarter 2023, Klimator had 28,824,751 shares outstanding, compared to 13,400,000 shares outstanding in the fourth quarter 2022.

During the first quarter 2023 the average number of shares amounted to 22 166 418. During the first quarter of 2022, the average number of shares amounted to 13 400 000 shares.

Profit per share

Profit per share for the first quarter amounted to SEK -0.20 (-0.46).

Auditor’s review

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

Next report

The next report is the company's interim report Q2, which will be published on August 31st 2023.

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